Rich Dad Poor Dad Summary : A Quick Book Review

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“There is a difference between being poor and being broke. Broke is temporary. Poor is eternal.”

Robert T. Kiyosaki, Rich Dad, Poor Dad

Rich Dad Poor Dad summary

Robert T. Kiyosaki considered him having two fathers in this book. Both of them offered him two choices by contrasting opposite points of view. One is POOR DAD, Robert’s biological father, highly intelligent and educated, who had struggled financially all his life. Another is RICH DAD, father of Robert’s best friend, who had been teaching him about money for over 30 years.

Throughout this book Robert T. Kiyosaki shows us how to manage money for wealth development.

Rich Dad Poor Dad Summary, Lesson 1: The Rich Don’t Work For Money

Lesson 1: The Rich Don't Work For Money

The author ‘Robert’ narrates a story about himself as a nine-year-old child, telling his POOR DAD or REAL DAD about his friend ‘Jimmy’, who had refused to invite him and his friend ‘Mike’ to a party at his beach house. The reason was they were “POOR KIDS.”

He asked his father, “How do I make money?”, “Well, use your head, son,”. The next day a partnership is formed between ‘Robert’ and his best friend ‘Mike.’ Both of them start collecting toothpaste tubes from their neighbors for the next several weeks. They try to make coins from that toothpaste tube. When they make one, Robert’s father and his friend smiled and tell them this is illegal.

However, his father advised him to take advice from Mike’s father, who was not particularly wealthy at the time but knew a lot about money. They have started to work for Mike’s dad or RICH DAD. Rich Dad gave Robert and mike a job of cleaning, three hours every Saturday morning at 10 cent hour rate. However, Robert doesn’t understand the reason why Rich dad wants him to learn by working an hour for only 10 cents.

After working 3 week at Rich dad office, Robert decided to quit. First of all, he was not learning anything from his Rich Dad and his pay scale is too low. So, when Robert decides to quit his job, ‘Rich Dad’ teaches him a lesson that helps him to grow into a wealthy, wise, and happy young man.

The lesson was “Never work for money Otherwise, you will spend your whole life blaming and switching jobs.” Rich Dad tells Robert that the rich don’t work for money; they let the money work for them. He also tells him that poor people live with two emotions: ‘Greed’ and ‘Fear’ and work in a pattern “get up, go to work, pay bills; get up, go to work, pay bills,” which he called ‘Rat Race.’

Additionally, Rich Dad explained a situation; a donkey is pulling a cart. The owner is hanging a carrot in front of it, where the donkey is chasing an illusion. Here, Rich’s dad taught him that instead of reacting to a feeling, he should think about it.  

Rich Dad Poor Dad Summary, Lesson 2 : Why Teach Financial Literacy 

Lesson 2 : Why Teach Financial Literacy

In 1923, a meeting was held between the greatest leaders and richest businessman of that time at Edgewater, Chicago. But, unfortunately, in between 25 years, All of them died, broke, commit suicide, or became insane.

Robert suspects that it may have happened because of the ‘Great Depression’ and the market crash that occurred in 1929. He also believes that many booms and busts will occur in the next 25 years, paralleling these people’s ups and downs. To sustain in the long term, Robert suggests focusing on money and focusing on education, which is our greatest wealth because people will grow rich through changes if they keep an open mind and learn.

As the story continues, Robert talks about his past experience with Mike getting financial education from their ‘Rich Dad’ about ‘Accounting’. Rich Dad taught them Two Rules. Rule One – understanding the distinction between assets and liabilities and Rule Two – Buying assets to be rich.

Cash flow pattern of a asset and a liability

Rich dad kept everything simple and straightforward to teach two pre-teen children and used as many pictures as possible.

“What is an asset” – asked Mike.

  –“Assets put money in your pocket.” Rich Dad Replied

Think of an asset as something that puts money in your pocket, while a liability is something that takes money out of your pocket. ‘Robert’ picturizes the cash flow patterns of three different social classes in this book –  Poor, Middle class, and Rich.

Cash flow pattern of poor, middle class and rich

This diagram shows how poor, middle class, and rich people handle their money and what they do after getting the money in their hands. The Poor and middle class don’t understand how to spend money, and it’s the main reason for their financial struggle.

This happens because of the lack of ‘financial literacy’ and not understanding the difference between ‘asset’ and ‘liability’. More money can never solve a financial problem. Intelligence can solve the problem. So, all we need to know is what money is and how money works.

Robert also demonstrates a misconception that people think their house is an asset. Owning a house only increases expense and liability. He also proves that owning a house is too expensive, and it can impact an individual in at least three ways

  • Loss of time
  • Loss of education
  • Waste of additional capital

So people shouldn’t treat their house as their asset. Instead, they should invest in income-generating assets.

Robert discusses three levels of employees and their working efforts.

income statement balance sheet
  • Those who work for a company make their shareholders and business owners rich.
  • People who work for the government by working hard only increase the government’s tax.
  • Those who work for the bank increase liabilities such as mortgage and credit card debt after paying tax.

Robert suggests learning how to make our extra efforts directly help our family and us. We need to concentrate on our own business and focus on acquiring assets rather than increasing liabilities.

Why Teach Financial Literacy  summary

Rich Dad Poor Dad Summary, Lesson 3 : Mind Your Own Business

Lesson 3 : Mind Your Own Business

This chapter focuses on the Number three rule of the rich. “Mind your own business.” People face financial struggle as they work all their lives for others and end up with nothing at the end of the day. If they mind their own business, their business will revolve around the Asset column rather than their income column.

Rich people think about the asset column where everyone else concentrates on the income column. Robert talks about the difference between a profession and a business. Most people have a misconception that their profession is their business.

Here Robert put an example of ‘Ray Kroc’, the founder of McDonald’s, where his profession was selling hamburger’s franchise, and his business was accumulating income-generating real estate. Rich people buy real assets, not personal effects or liabilities with no real value.. Robert, in this book, categorized real assets into several different categories :

  1. Businesses that do not require the presence and are run and managed by other people.
  2. Bonds
  3. Stokes
  4. Income-generating real estate
  5. Mutual funds
  6. Royalties from personal. Intellectual properties such as scripts, books, music, patents.
  7. Notes (IOUs)

Robert talks about his Rich Dad, who teaches him to acquire assets he loves and take care of them. However, investing in an asset is always risky, but the risk can be reduced if you love the investment and understand the game.

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Rich Dad Poor Dad Summary, Lesson Four: The History of Taxes and The Power of Corporation 

Lesson Four: The History of Taxes and The Power of Corporation

Robert begins this chapter by telling the story of ‘Robin Hood’, a thief who took from the rich and gave to the poor. It makes a concept among people that The Rich should pay more tax for the welfare of The Poor.

However, the concept “Take from the rich and give it to the poor” actually caused problems for the poor and the middle class. The educated upper-income middle class is heavily taxed and pays for the poor. However, Rich people use their financial knowledge and form a corporation. The income tax rate for corporations is much lower than for individuals, and those expenses can be covered with pre-tax dollars.

An employee earns and is taxed and tries to live with the rest of the money. On the other hand, a corporation earns and spends as much it wants and is taxed on the remaining. Every time people want to punish The Rich, they don’t voluntarily pay taxes; they react. They find a way to reduce their tax burden. First, they persuade the politicians to create loopholes and change the existing laws. They hire an accountant to reduce the tax. They play the game smartly and do it through Corporation.

Rich Dad explained a point to Robert and Mike that the success of a government bureaucrat and a capitalist is measured on opposite behavior. Government bureaucrats are paid to spend money to hire people in the organization.

The larger the organization, the more he is respected, and more tax is needed to support the organization. On the other hand, the fewer people a capitalist hires for his organization, the less money he will spend, the more he will be respected by his investors.

Robert states at the end of this chapter that without Financial IQ, financial independence would have been rugged. However, Financial intelligence is made up of the knowledge of Four broad areas of expertise.

  • Accounting
  • Law
  • Investing
  • Understand the market 
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Rich Dad Poor Dad Summary, Lesson Five : The Rich Invent Money

Lesson Five : The Rich Invent Money

After patenting the telephone, ‘Graham Bell’ went to ‘Western Union’ to sell the patent and his tiny company. He asked for $100000 for the whole package. The president of Western Union refused his offer, telling him the price is too high. Later, ‘AT&T’ bought the package and became a multimillionaire industry. 

Robert spends a couple of years in the teaching profession. He noticed many students who have higher education and skills but couldn’t earn much money because of a lack of self-confidence. It’s Robert’s Perspective that both technical knowledge and courage are essential to be a financial genius.

Robert invented a game named ‘CASHFLOW’ to make us learn how money works. You can play the game on this website. You can learn about the interaction of Cash Flow between the ‘Income Statement’ and the ‘Balance Sheet’.

Robert talks about one of his students, recently divorced, who didn’t understand the game ‘CASHFLOW’ and got angry at Robert. Later, she understood that the anger came from her embarrassment about not understanding the numbers. She also had a misconception that it’s a man’s job to handle the finance. 

Robert’s Rich Dad once said that “Money is not real.” The more you think the money is real, the harder you work to earn it. If you think money is not real, you will grow rich faster.

Later, in this lesson, Robert put some examples of how he earned millions by investing in real estate and the stock market. For example, he worked with a bankruptcy attorney and bought houses at a lower price from the people who failed to pay the loans. Later, he advertised and sold those houses at market rate. 

“Great Opportunities are not seen with your eyes. They are seen with your mind”.

Robert T. Kiyosaki

Robert talks about two types of investors at the end of this chapter. One who plays the game safely and makes safe and secure investments like investing in mutual funds. Another type of investors create investment opportunities, and we call them ‘Professional Investors.’ To be a professional investor, you should work with these three skills – 

  • Find an opportunity that everyone else missed.
  • Raise Money.
  • Organize smart people.

Through this chapter, we learn a lot of things like we should train our brain to generate money quickly and money isn’t a real thing. The more you think money is real, the more it’s hard to earn money.

Rich Dad Poor Dad Summary, Lesson Six : Work to Learn – Don’t Work for Money

Lesson Six : Work to Learn - Don’t Work for Money

In 1995, Robert went to Singapore for an interview with a journalist who told him that she wanted to be a best-selling author like him. But her novel, which everyone said was excellent but never sold a copy. So Robert suggested her to take a course on sales training. But she did not enroll. 

This story revolves around the fact that talented people struggle financially all their lives, just like the journalist who specialized in only one skill. However, if she takes the sales training, she might promote and advertise her next novel and make it a bestseller by using this skill. 

When Robert came out with his first book, ‘If You Want To Be Rich & Happy Don’t Go To School,’ one publisher suggested Robert to change the book’s title. However, Robert knew that the title he selected for the book was controversial. So, he didn’t change. Surprisingly it worked. 

When Robert graduated in 1969, he was hired by ‘Oil of California’ for its oil-tanker fleet. The pay was ok for a first job after college, and it could be a great career. However, after six months, Robert resigned from the job and joined the ‘Marine Corps’ to learn about how to fly. Where Most people waste their time acquiring a specialized skill, Robert gave his time to gain new skills. His rich dad always said, “Learn a little about a lot.”

In 1973, Robert resigned from the ‘Marine Corps ‘and joined ‘Xerox Corp’. he was a kind of shy person, and to overcome from this problem, he joined Xerox and also to improve his selling skills. You might think Robert is a crazy guy. However, there is a reason behind switching from one job to another. Robert went to school to learn about international trade.

Then, he joined the Marine Corps so that he learned how to lead troops. These leadership skills could serve him well in whatever business he had. This was how Robert got different skills and now became a successful person.

Unfortunately, people are looking for a secure job where they should spend time acquiring new skills. So instead, what we should do is take a second job and learn a second skill

One day while taking his class, Robert asked his students, “How many of you can cook a better hamburger than McDonald’s?”. So almost everyone put their hands up. Then Robert asked them, “So if most of you can cook a better hamburger, how come McDonald’s makes more money than you?”

The reason McDonald’s makes millions is that McDonald’s is excellent in business skills. In addition, their communication and selling skills are excellent. 

The world is full of talented poor people. To succeed, they must devote more time to learning new skills like McDonald’s system. For the most part, selling and marketing skills are difficult to master. Especially because people are afraid of being rejected. The better you are at handling your fear of rejection and communicating with others, the easier your life will be. 

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Rich Dad Poor Dad Summary, Chapter Seven : Overcoming Obstacles

Chapter Eight : Overcoming Obstacles

In this chapter Robert demonstrates Five reason why rich people fails to develop overflowing asset columns

  • Fear
  • Cynicism
  • Laziness
  • Bad habits
  • Arrogance 

Reason No 1 : Fear

Everyone around us has a fear of losing money. The main difference between Poor people and Rich People is how they handle the fear of losing. Rich Dad used to tell Mike and Robert, the main reason for the lack of success is that most people want to play too safe as they are so afraid of losing. ‘Fran Tarkenton’, a great NFL quarterback, says, “Winning means being unafraid of lose.”

However, losing is not bad at all. Falling off a bike is just a part of learning to ride. For losers, losing defeats them; for winners, losing motivates them.

If you want to be Rich with your little assets, you need to be ‘Focused’ rather than ‘Balanced.’ Today, most successful rich people like Bill Gates, Mark Zuckerberg, Donald Trump are focused and not balanced. Robert suggests that if we don’t want to take risks, play it safe and sound, we need to start it earlier because it takes time to grow the assets if we want to play safely.

Reason No 2: Cynicism

We all know the story of “Chicken Little,” who ran and warned people by telling “The sky is falling, The sky is falling.” We all have a “chicken little” inside ourselves. A cynic is fear and doubts that clouds our thoughts.

“I’m not good enough,” “I’m not smart,” “he/she is better than me” are the thoughts that often paralyze us from playing the game. Unfortunately, these indecision are often so loud that we fail to react.

Robert states that it’s the reason most people are poor because when it comes to investing, they are filled with “chicken little” inside themselves. Rich Dad often said, “Rich analyze,” “Cynics criticize.” 

Rich Dad also explained that criticism blinded people, and analysis opened up the eyes. Analysis helps to see opportunities that everyone missed, and finding opportunities that everyone missed is the key to any success.

When it comes to “Chicken Little,” Rich Dad always told Robert to see what ‘colonel sanders’ did. At the age of 66, he became a multimillionaire by selling recipes for fried chicken. However, he was rejected 1009 times before anyone wanted to buy his recipe book.

Reason No 3 : Laziness

Most people focus on spending money that they have rather than generate more money. In childhood, we are taught, “Greedy people are bad people.” Therefore, it is forbidden to earn more money than you want.  

Robert demonstrates that you should change our statement on “I can’t afford it” to “How can i afford it”?. It will make sense and make us think about it. You can learn how to earn more money in less time if you change the way of thinking regarding financial problems.  

Reason No 4: Habits

We should create some good habits, including financial habits. Rich Dad used to say, “Take your portion before paying the creditors.” If you pay yourself first. then when it comes to paying the creditors, the pressure will create other forms of income. So, The pressure worked like a motivation for Rich Dad.

Reason No 5: Arrogance

‘Arrogance’ is something we call ‘Ego’ plus ‘Ignorance.’ Successful people are not arrogant. However, to hide their ignorance, some people act arrogant. There are many people in the world; they don’t have any financial knowledge. Robert suggests they should find an expert in the field and read books on that topic.  

Rich Dad Poor Dad Summary, Chapter Eight : Getting Started

Chapter Nine : Getting Started

Robert says that most of us subscribed to dogma to find a government job and work for money. So that, the Government will take care of ourselves after retirement, these types of jobs help you live our lives but not make us a financial genius. 

Robert states Ten steps to widen your financial intelligence in this chapter.

  1. Find a reason greater than reality: The power of spirit 

It’s not so easy to be Rich or financially free. You need to determine the reasons or purposes of what you “want” and what you “don’t want” in your life.

2. Make Daily Choices: The Power of Choices

If you want to be Rich, you need to think like The Rich. Therefore, you should follow the financial habits of rich people. Robert shares a secret – INVEST FIRST IN EDUCATION. If you learn a process, it’s easier to get money from that process. 

3. Choose friends carefully: The power of association

Instead of spending your time and energy with different people, Robert suggests choosing friends carefully in our lives. Robert learned from his rich friends what he needed to do to be Rich. On the other hand, his poor friend taught him what he needed to avoid. 

4. Master a formula and then learn a new one: The power of learning quickly 

Most of the people work for –

  • Earn 
  • Spend 
  • Save 
  • Invest

They wake up early and go to work. This daily routine became the formula. If you want to earn more money, you need to change your habits and adopt new ones. You need to make some new formulas and apply them in a disciplined way.

5. Pay yourself first: The power of self discipline

pay yourself first

Here, Robert demonstrates that you don’t feel that pressure when you earn money for yourself than when you have some employee those you have to pay. This pressure makes you think and earn more.

When you pay yourself first, it becomes an asset, and when you pay others first, it becomes an expense. So first, invest in assets; it will generate the income that covers up the expenses.

6. Pay your brokers well: The Power of good advice.

We live in an information age. Your advisors and brokers will give the information that helps you to earn millions. So, you should pay your brokers and advisers timely and in reasonable amounts.

7. Be an Indian Giver: The Power of getting something for nothing

Here, Robert talks about an ‘Indian giver’ who gave a blanket to a European because it was so cold. He expected that the settler would return the blanket when he asked for it back. However, he didn’t return it. When it comes to investment, you should act like this. You should get your money back as soon as possible. 

8. Use assets to buy luxury: The power of focus

It is not a wise decision to buy luxuries by taking loans from the bank. First, you should buy assets from your income. Later, these assets will generate income, and with that income you can buy assets. 

9. Choose Heroes: The Power of Myth

it’s too important to make an idol in your life. It will motivate you when you live your hero’s life, and you will subconsciously act like him. Heroes inspire us. They make things easy for us. 

10. Teach and you shall receive: The power of giving.

If you feel “short” or “need,” you first need to give. Rich Dad donated money to his favorite charity or church when he was short of money. He believes that when you give, it will always come back.  

Rich Dad Poor Dad Summary, Chapter Nine : Still Want More? Here are Some To Do’s

For those people who don’ t believe in philosophy but believe in action, Robert shares some To Do’s in this chapter –

  • Take a break and determine what is working and what is not. Stop doing the thing that is not working and search for new ideas to execute.
  • Take action. Most of the people are poor because they are afraid of taking action. Read books, attend seminars, watch tapes and take actions.
  • Make profit when you buy, not when you sell.
  • Learn from your heroes and from history.

Final Word:

In this information age, it’s tough to survive if you don’t have adequate financial intelligence. Making money is not so hard, the only thing you need to change is your way of thinking. This book provides some great insights to change your thinking and utilize the power of money that will work for you. Robert says “Awaken the financial genius that lies within you. Your genius is waiting to come out”

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