Rich Dad and Poor Dad Book's Summary

LESSON 1: THE RICH DON’T WORK FOR MONEY

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

Money is one form of power. But what is more powerful is financial education.

Opportunities come and go. Being able to know when to make quick decisions is an important skill.

It’s easier to change yourself than everyone else.

Every person has a weak and needy part of their soul that can be bought, and he knew that every individual also had a part of their soul that was resilient and could never be bought. It was only a question of which one was stronger.

People’s lives are forever controlled by two emotions: Fear and Greed.

The main cause of poverty or financial struggle is fear and ignorance.

History proves that great civilizations collapse when the gap b/w the haves and have-nots is too great.

Anger combines with love to create passion – a key component of learning.

The moment you see one opportunity, you’ll see them for the rest of your life.

When it comes to money, most people want to play it safe and feel secure so passion does not direct them, fear does.

Edgar Dale gets credit for helping us to understand that we learn best through action – doing the real thing or a simulation. Sometimes it’s called experimental learning. Dale and his Cone of Learning tell us that reading and lecture are the least effective ways to learn. And yet we all know how most schools teach: reading and lecture.

Today’s millennials are learning the hard facts of life. Jobs are harder to find. Robots are replacing workers by the millions. Learning by making mistakes through trial and error is more and more important. Books learning is proving to be less valuable in the real world. No longer does a college education guarantee a job.

LESSON 2: WHY TECH FINANCIAL LITERACY

Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.

The illiterate of the 21^st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn.

Japanese were aware of three powers: the power of the sword, the jewel, and the mirror.

Sword – Power of weapons.

Jewel – Power of money.

Mirror – Power of self-knowledge.

A person can be highly educated, professionally successful, and financially illiterate.

A/c to psychiatrist, the fear of public speaking is caused by the fear of ostracism, the fear of standing out, the fear of criticism, the fear of ridicule, and the fear of being an outcast.

The fear of being different prevents most people from seeking new ways to solve their problems.

“An intelligent person hires people who are more intelligent than he is.”

The most important rule is to know the difference b/w an asset and a liability.

Once you understand the difference, concentrate you efforts on buying income-generating assets. That’s the best way to get started on a path to becoming rich.

More important than money to our survival is our education and the ability to learn.

“If you want to be rich, you need to be financially literate.”

LESSON 3: MIND YOUR OWN BUSINESS

Financial struggle is often the result of people working all their lives for someone else.

Start minding your own business. Keep your daytime job, but start buying real assets, not liabilities.

Real assets fall into the following categories:

o   Business that do not require my presence.

§  I own them, but they are managed or run by other people.

o   Stocks

o   Bonds

o   Income-generating real estate

o   Royalties from intellectual properties such as music, scripts, and patents.

o   Anything else that has value, produces income or appreciates, and has ready market.

Mind your own business. Don’t spend your whole life working for someone else.

To many people spend their lives minding someone’s else business and making them rich.

Once a dollar goes into your asset column, it becomes your employee.

The best thing about money is that it works 24 hours a day and can work for generations.

LESSON 4: THE HISTORY OF TAXES AND THE POWER OF CORPORATIONS

In America – the land where a tax on tea led to the Boston Tea Party protest and helped ignite the Revolutionary War – the adaptation of the 16^th Amendment in 1913 made an income tax permanent.

And with money comes great power that require the right knowledge to keep it and make it multiply. Without that knowledge, the world pushes you around.

Financial IQ, or Financial intelligence, is what makes that possible. It’s made up of four things:

1.       Accounting: Financial literacy, or the ability to read numbers and evaluate the strengths and weakness of any business.

2.      Investing: the science and strategies of money making money.

3.      Understanding Markets: the science of supply and demand, and market conditions.

4.     The Law: tax advantages and protections.

Understanding those legal advantages is profound when it comes to long term wealth.

Left-Hemisphere moment: Accounting is financial literacy or the ability to read numbers. This is a vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down.

Right – Hemisphere moment: Investing is the science of “money making money.” This involves strategies and formulas, which use the creative side of the brain.

Subconscious moment: Understanding market is the science or supply and demand. You need to know the technical aspects of the market, which are emotion driven, in addition to the fund or economic aspects of an investment.

“A person who understand the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an employee or a small business sole proprietor.” 

LESSON 5: THE RICH INVENT MONEY

Often in the real world, it’s not the smart who get ahead, but the bold.

Guts, chutzpah, balls, audacity, bravado, cunning, daring, tenacity, and brilliance. This factor, whatever it is labelled, ultimately decides one’s future much more than school grades do.

Today, wealth is in information. And the person who has the most timely information owns the wealth.

Financial genius requires technical knowledge as well as courage. Take risks, be bold, let your genius convert that fear into power & brilliance.

Those who have creative financial minds escape the Rat Race the fastest.

Financial intelligence is simply having more options, figuring out ways to create opportunities or altering situations to work in your favor.

Markets go up and down, and investment come and go. The world is always handling you opportunities of a lifetime; you simply need to be able to see them.

Old ideas are some people’s biggest liability. It is a liability simply because they fail to realize that while that idea or way of doing something was an asset yesterday, yesterday is gone.

Rich people are often creative and take calculated risks.

The single most powerful asset we all have is our mind. If it is train well, it can create enormous wealth seemingly instantaneously. An untrained mind can also create extreme poverty that can crush a family generations.

It is not gambling if you know what you’re doing. It is gambling if you’re just throwing money into a deal and praying.

It is what you know that is your greatest wealth. It is what you do not know that is your greatest risk.

LESSON 6: WORK TO LEARN – DON’T WORK FOR MONEY

Communication skills such as, writing, speaking and negotiating are crucial to a life of success.

The main management skills needed for success are:

1.    Management of Cash flow

2.    Management of Systems

3.    Management of People

Sales = Income

Your ability to sell – to communicate and position your strengths – directly impacts your success.

The situation you fear most is the skill that you need to learn and conquer. And you may have to force yourself to do it, though – like going to the gym – you’ll be glad you did.

Being technically specialized has its strengths as well as  its weakness.

Giving money is the secret to most great wealthy families.

The most important specialized skills are sales and marketing. The ability to sell – to communicate to another human being, be it a customer, employee, boss, spouse or child – is the base skill of personal success.

 

LESSON 7: OVERCOME OBSTACLES

The five main reasons financially literate people may still not develop abundant cash flow are:

1.       Fear

2.      Cynicism

3.      Laziness

4.     Bad habits

5.      Arrogance

Overcoming fear: It’s ok to be fearful. One way to overcome that is to start early and allow the power of compounding interest work for you.

The primary difference b/w a rich person and a poor person is how they manage that fear.

Overcoming Cynicism: Doubts and cynicism keep most people poor. Rich dad liked to say, “Cynics criticize and winners analyze.” Winner keep their eyes open and see opportunities everyone else missed.

Real estate is a powerful investment tool for anyone seeking financial independence or freedom. It is a unique investment tool.

Overcoming Laziness: What’s the cure? A little greed. Rather than saying “I can’t afford it.” Change your mindset to, “How can I afford it?” That opens the brain and forces it to think of solutions.

Overcoming bad habits: To be successful, you must develop successful habits.

Overcoming Arrogance: Many people use arrogance to hide their own ignorance. Ignorance isn’t bad thing, if you react to your own ignorance by educating yourself by finding an expert in the field.

Choose to analyze instead of criticize. Cynics criticize, but winners analyze and spot overlooked opportunities that others have missed.

“I can’t afford it” caused sadness, a helplessness that leads to despondency and often depression. “How can I afford it? Opens up possibilities, excitement, and dreams.

We’re all heroes at something, and cowards at something else.

If you hate risk and worry, start early.

If you’re going to go broke, go big. You don’t want to admit you went broke over a duplex.

Winning means being unafraid to lose.

LESSON 8:  GETTING STARTED

You must awaken the financial genius sleeping within in order to find these great deals.

10 steps that you can use to awaken you financial genius. Follow the ones you want, or make up your own – Your financial genius is up to the task.

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

A reason or a purpose is a combination or “wants” and “don’t wants” – just like Robert’s reason for wanting to be Rich.

Don’t Want	Want
I don’t want to work all my life	I want to be free to travel the world and live in the lifestyle I love
I don’t like being an employee.	I want to be young when I do this.
	I want to simply be free
	I want control over my time and my life
	I want money to work for me

 

2.      Make daily choices: the power of choice.

You have the choice everyday weather to be rich, poor or middle class. Your spending habits reflect who you are. The poor have poor spending habits.

We all have the choice every single day what we do with our time and money, and what we put in our heads.

Robert chooses to be rich and makes that choice everyday.

He urges people to invest first in education, as our mind is our powerful tool.

When you learn something new, you often must make mistakes to fully understand it. Arrogant or critical people are afraid of taking risks so often won’t listen to experts

Listen. Learn. Take a long view of wealth, not a get – rich – quick mentality. Invest in your greatest asset – your mind – before investing in stocks or real estate.

3.      Choose friends carefully: the power of association

Be true to yourself and don’t go along with the crowd. This can be one of the hardest parts of wealth building.

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

Be careful what you learn, because you become what you put in your head. And it’s not just about faster formulas but learning new formula faster.

5.      Pay yourself first: the power of self – discipline

Self – discipline may be the most difficult to master if it’s not part of your make up. But personal self – discipline is the No. 1 delineating factor b/w rich, the poor , and the middle class.

6.     Pay your brokers well: the power of good advice.

Information is priceless. A good broker should provide you with information, as wll as making you money.

Companies have a board of directors because they know the value in having people smarter than they are around. You should have a board of directors, too.

7.      Be an Indian giver: the power of getting something for nothing

8.     Use assets to buy luxuries: the power of focus

Robert loves luxuries as much as the next person. But he won’t borrow money for them, instead focusing on the asset column to create the money to buy those luxuries.

Developing cash flow from an asset column is easy in theory – what’s hard is the mental fortitude to direct money to the correct use.

Borrowing money is easy in the short term but harder in the long run.

9.     Choose heroes: the power of myth

By having heroes, we tap into their genius, and because they make it look easy, they inspire us to try.

10.  Teac and you shall receive: the power of giving

If you want something, you first need to give.

Whenever you feel in need of something – whether that’s money, a smile, love or friendship – give it first and it will come back in buckets.

Be generous with what you have and make sure you are giving and make sure you are giving for the joy that giving itself brings, not giving simply to receive.

Keep your mind open to new idea and new ways of doing things. These can add to the synergy of other accumulated ideas.

LESSON 9: STILL WANT MORE? HERE ARE SOME TO DO’S

Remember Profits are made in the buying, not in the selling.

Small thinkers don’t get the big breaks. If you want to get richer, think big.

You must take action before you can receive the financial rewards. Act now!

FINAL THOUGHTS

Education and wisdom about money are important. Start early. Buy a book. Go to a seminar. Practice. Start small. It’s what is in you head that determines what is in your hands. Money is only an idea.

In the world of accounting, there are there kinds of income:

1.       Ordinary earned:

2.      Passive: real estate, Investment

3.      Portfolio: Stocks & bonds.

Taxes are highest on earned income and lowest on passive. As rich dad would say, “The government taxes the income you work hard for more than the income your money works hard for.”

Knowing the differences in the three incomes and learning the investment skills of how to acquire the different incomes is basic education for anyone who strives to acquire great wealth and achieve financial freedom – a special kind of freedom that only a few will ever know.