"Rich Dad Poor Dad" is the story of two dad of the author. One dad was his real dad whom he called poor dad and the rich dad was the dad of his friend. His real father taught him how to write resume and get jobs whereas his rich dad taught him how to create jobs. This books consists of 10 chapters all about how both dads influenced the thinking of author in terms of money and investments.
He starts his journey when he was a child and started to open a business with his friend Mike. They failed and both of them approached Mike' s father to learn how to become rich. The book is all about the difference between a poor man and rich man.
Author thinks that traditional schooling system lacks Financial education. Schools focus on making professional skills and ignore financial literacy. Here are some differences between the thinking of both of his Dad:-
- His poor dad considered that buying a house makes up asset, but his rich dad considered it as liability.
- His poor dad taught him how to make resumes to get the job whereas his rich dad taught him how to create jobs.
- His poor dad paid bills and taxes regularly whereas his rich dad tried to cut down the taxes
Chapters of the book
The book is comprised of 10 chapters but most of it's important things are focused on 6 chapters
- Chapter 1: The Rich Don’t Work for Money
- Chapter 2: Why Teach Financial Literacy?
- Chapter 3: Mind Your Own Business.
- Chapter 4: The History of Taxes and the Power of Corporations.
- Chapter 5: The Rich Invent Money.
- Chapter 6: Work to Learn – Don’t Work for Money.
Introduction
Robert Kiyosaki is the author of this book.He has two fathers who shaped his mind towards money and investments.
His poor dad was his real father who was very well educated and intelligent. But one thing his father didn't knew was financial literacy. His dad preached that studying hard can give you high paying job.
Author's rich dad who was his friend Mike's dad. He was also highly educated like his real father but he had much better financial literacy than author's real father. The rich dad was a businessman and always eager to learn. His rich dad didn't studied enough and was a eight-grade dropout. Although his rich dad became a millionaire and had good knowledge about how money works and how to make money work for yourself.
The lessons in the book shows the difference between rich and poor mindsets. What a poor considers assets is not asset for a rich guy and vice versa.
Chapter 1: The rich don't work for money.
The title of the first chapter is ' Rich don't work for money'. This does not mean that rich does not do any work. This means that rich does not work for money but money works for him. His rich dad always says that "The poor and middle class work for money. The rich have money work for them". By saying this rich dad means that poor people don't intelligently invest money and thus becomes more poor. Rich people invests money and the money grows itself, hence making rich more rich.
The people who are rich don't work hard, they just work smart. The people who are going to become rich put more efforts on manipulating money, learning how money works and learning to invest.
Most people have fear to get fired from job, fear of not having money, fear of financial struggle. They finally work for money and become slave of money.
Chapter 2: Why teach Financial Literacy?
The second chapter explains the difference between assets and liabilities. The main motive to teach financial literacy is to make people know the difference between assets and liabilities. Most of the people don't know the difference between assets and liabilities and are caught into a debt cycle.
His poor dad considered residence as a asset. But his rich dad considered residence as a liability. Most people buy luxury and don't make assets. It does not mean that rich does not buys luxury but they first make assets.
Most people are unable to differentiate between assets and liabilities. The simplest way to differentiate between assets and liabilities is to just remember the line:-
Anything that makes money is an asset. Anything that takes money is a liability.
Even in financial world employees are considered liability because they take up salary. A house in which you are residing can be thought as a liability as you are paying for electricity bill, water bill, maintenance etc. But if you give the house on rent and generate income from the rent , the house will be considered an asset.
Chapter 3: Mind your own business.
This chapter teaches us that first pay off your debts and start investing in income making assets.
Most people spend their entire lives working in somebody else’s business and making other people rich by working for them.
To become one should invest in assets and become self dependent.
Chapter 4: The History of Taxes and Power of Corporation.
In this chapter authors describes how a rich and poor pay taxes.
Big companies and rich people first earn, then spend and then pay taxes. Whereas poor person first earns, pays tax, then spends.
The poor dad earns nice and spends a good amount of his income in tax, while his rich dad invests and pays tax at the last. By reinvesting the rich minimises taxes. Rich always tries to minimise the tax whereas the poor don't.
Big corporation do the same. They invest more and try to cut out tax as much as they can. Most government can't do much as large corporations have power and are highly influential to economy.
Chapter 5: The rich invent money.
This chapter says that the rich invents money, it means that the rich always look for opportunities. Rich always tries to make best out of opportunities.
Author's rich dad says that most people ask for salary but no one ask for opportunities and how much they will learn.
Most poor people don't recognise the opportunity or are not financially educated to find out opportunities hence they have to work for those who had found the opportunity and made best out of it.
Chapter 6: Work to learn - Don't Work for Money.
This chapter gives advice that you should not work for money but to learn new things and to learn new skills.
Author's dad was well educated financially and academically, but for him working of a good paying job with job security was meant everything to him whereas his Rich dad did job to learn new skills and eventually became a millionaire. Rich people pay more attention on skill development.
The book is highly adviced to gain financial literacy. The full version of the book has more chapters. This book has 4.1 rating out of 5 on GoodReads. Online reviews are positive towards the book.
