Rich Dad vs Poor Dad

Rich Dad Poor Dad by financial maestro Robert Kiyosaki is a must-read for all seeking financial freedom by learning the principles of investments and financial literacy. Sharon L. Letcher, C.P.A co-wrote it, and it was first published independently in 1997 because publishers did not believe in the potential of this financial masterpiece. Still, after publication, it quickly became the leading book on personal finance

Rich Dad Poor Dad removes the mountain of ignorance that beclouds the practical difference between an asset and a liability and also makes it clear that the difference between the rich and poor is not exactly the money in their account but the knowledge and understanding they have about money and their attitude towards money. 

Why Rich Dad Poor Dad? 

The title comes from the author’s experience with two men who played a fatherly role in his life. The first was his biological dad, who was a devoted preceptor but was poor, and his second dad happened to be the father of his friend(Mike), whom he later began to refer to as his rich dad. This rich dad started to teach Robert and Mike the rudiments of any financially free individual and how investments work. 

The first challenge that Robert faced was choosing between his father’s honest yet unchallenged school of thought about money, which was for him to study and work hard to rise to the top of his career and save money. However, His rich dad, who was not a college graduate, kept telling him to work smart instead of hard, invest and not just stop at savings and to learn about how money works. 

At nine years old, very ingenious, Robert and Mike decided to make some money, only to be shocked that they would only be making counterfeit money they could not spend. This undying passion for learning about money drove these little boys to seek the advice of Mike’s dad, who began to teach them how to develop a sound financial base after proving their desire to learn. 

The Six core lessons of the book

The book contains six core lessons that Robert and Mike learned from the rich dad. These lessons are;

  • First Lesson – The Rich Don’t Work for Money
  • Second Lesson – Why Teach Financial Literacy?
  • Third Lesson – Mind Your Own Business
  • Fourth Lesson – The History of Taxes and the Power of Corporations
  • Fifth Lesson – The Rich Invent Money
  • Sixth Lesson – Work to Learn – Don’t Work for Money

We will dive into the summary of each lesson so that if you are like most people and do not like to read so many books, this will significantly help you learn the principles of wealth. 

  1. Lesson One – The Rich don’t work for money.

This first lesson emphasises not that the rich do not work but that they do not work for money like the poor and the middle class do. In fact, according to Robert, his rich dad showed him that the poor and the middle-class work so hard trying to make money, but the rich and those who want to learn the dynamics of money discover how to make money work for them. 

  1. Lesson Two – Why Teach Financial Literacy?

This second lesson definitively distinguishes between an asset and a liability. Robert’s rich dad defined these two counterintuitively, stating that an acquisition is not an asset if it does not generate revenue or appreciate. Robert explained that many people do not realise that to get wealthy, you have to focus on increasing the streams that generate money(assets). 

In this chapter, he explained that knowing the difference between an asset and a liability could just be your key to the world of the wealthy. For example, buying a bigger house is not an asset if it is still taking money from your pocket. It is an asset if you buy one and rent it out because it will pay for the balance, bring in more revenue, and appreciate. 

  1. Lesson three – Mind Your Own Business

The takeaway from this lesson is that many people do not mind their business, so it becomes difficult for them to be financially free. He explained that many spend their lives building another person’s business instead of their own. They spent their lifetime enriching someone else. To be financially free, Robert advises that you must pay off debts and begin to put your money into the asset column by investing in revenue-generating opportunities. He also advised that to be financially healthy, you must learn to invest much of your money in assets. 

  1. Lesson Four – The History of Taxes and the Power of Corporations

In this chapter, Robert explains a profound fact many do not realise. He proves that the middle class needs to learn that they pay the highest tax percentage. An average middle-class earner works to pay the government, while the rich have found a legal way to reduce their taxes through corporations. 

The rich use their corporate structure to spend before they get taxed, but most employees pay taxes before they can spend their hard-earned money, making a significant difference when building long-term wealth. 

In wrapping up the chapter, Robert delves into legal matters and explains that a sound knowledge of tax laws is an excellent advantage for building long-term wealth. 

  1. Lesson Five  – The Rich Invent Money

Little did Robert know that his childhood attempt at making money was a strategic key to financial freedom. An individual who wants to invent money must be able to find opportunities to recognise deals and partnerships that are obscure to many people. 

Robert also divides investors into two kinds- Investment package investors and Professional investors. 

  • Investment package investors invest in stocks, bonds, CDs, or real estate crowdfunding.
  • Professional Investors can Identify opportunities, raise funding for those opportunities and network with relevant people to actualise these opportunities. 
  1. Lesson Six – Work to Learn – Don’t Work for Money

In Roberts’s words, “Young people should be more interested in working to learn than working for money”. He explained that with his personal story of working in the Marines to learn leadership and management, after which he worked at Xeros, where he learnt marketing and sales. These two combinations helped him start his own business. To avoid the rat race, young people must be watchful of the slogan I want to work for money and instead commit to a life of learning, which will later be a great advantage for building wealth. 

Overcome your Obstacles

As Robert closes the book, he explains the obstacles that anyone aiming for financial freedom must overcome if they are going to make headway in their pursuit: Fear, Cynicism, Laziness, Bad Habits, and Arrogance.