Rich Dad Poor Dad Summary
By: Iliyan Hirani
Tags: Book Recommendations, Money Management, Rich Dad Poor Dad, Entrepreneurship, Motivation

Lesson №1: The Rich Don’t Work For Money

At the age of 9, Robert Kiyosaki and his best friend Mike asked Mike’s father (Rich Dad) to teach them how to make money. After 3 weeks spent cleaning one of Mike’s Dad’s many stores for a poverty wage (10 cents a week!), Kiyosaki couldn’t take it anymore and increasingly began to think about quitting. This is the moment that Rich Dad chose to give him his first lesson about money: some people leave their job because they are not being paid enough. Others see it as the opportunity to learn something new.

Rich Dad went on to ask the two young boys to work for him for free. By acting this way, he wanted to force them to imagine a way to create their own source of income that was independent of their work for him. The inspiration came to them when they noticed that some comics were left lying around the shop. That’s all it took: they recovered them and opened a library for their classmates, making them pay an entrance fee: 10 cents for 2 hours of reading. They paid Mike’s sister 1 dollar a week to deal with managing their little business. Soon, they were making $9.50 per week, without having to worry about managing their library. Their first company had come into existence!

Lesson №2: Why Teach Financial Literacy?

The gap which is currently widening between the richest and the poorest is not due to the chance. The educational system, such as it is built today. It does not allow this gap to be reduced. Its primary objective is to teach you to enter the working world as it already exists, and therefore, to allow you to become a very good employee. Not a very good employer. And that makes all the difference. Neither does the current educational system teach about the basics of managing personal finances that have allowed the rich to build their wealth. It is up to you to take responsibility to train yourself and to use this knowledge to acquire the assets that will allow you to generate income. The problem is not how to know how much you are earning, but how much you can put aside. The first step towards getting out of the rat race is to:

UNDERSTAND THE DIFFERENCE BETWEEN AN ASSET AND A LIABILITY

An asset is a title or contract that allows its owner to generate income. A liability, on the other hand, is to generate expenditure.

Here is why your principal residence is NOT an asset:

You will work your whole life to pay back the mortgage you took out. Your maintenance costs represent a significant amount. You must pay a property tax. Your principal residence may depreciate if the real estate market drops or if you buy at the top of the cycle. Rather than investing in an asset that earns you money regularly, you repay your monthly credit to the bank. In other words, the real owner of your home is the bank!

Here are a few examples of real assets:

An apartment that you rent out and whose rent as paid for by the tenant allows you to repay the monthly loan repayment contracted to acquire the property,

A business that does not require you to be present but of which you are the main shareholder.

Lesson №3: Mind Your Own Business!

Kiyosaki began his professional career by selling photocopiers for Xerox. Using his revenue, he invested in real estate. In the space of just 3 years, the revenue generated by his investments in real estate exceeded his salary. He then decided to leave the company and to take care of his own business full-time. He knew that it was the only solution to get out of the rat race. Do not spend all your income. Build yourself a diversified portfolio of assets and you will spend later when these assets make you enough.

Lesson №4: The History of Taxes and the Power of Corporations

Income tax first came into being in England in 1874. In the United States, it was introduced in 1913. What was originally a plan to have the rich contribute to the growth and development of the Nation was later extended to the middle classes and the poor. The rich have a secret weapon to protect themselves from, particularly heavy taxes. It is quite simply their company. It offers them several advantages in terms of taxation. The mechanism by which the rich minimize their taxes is the following: Company-owned company employees 1. Earn money 2. Spend their money 3. Pay their taxes 4.Spend their money

In other words: PAY YOURSELF FIRST!

Lesson №5: The Rich Invent Money

Self-confidence associated with a high Financial IQ will no doubt be your safest allies when it comes to achieving financial freedom. Of course, you will need to save each month before investing. But this alone will not suffice. Use your time wisely and find the best opportunities. Identify an opportunity that no-one else has spotted. Learn how to identify what REALLY gives a business added value. Do you honestly think that hamburgers are at the heart of the McDonald’s business? In reality, the heart of the Business of the fast-food chain is the real estate and the search for strategic locations in the most fashionable neighborhoods in every city in the world. There is one last thing that you will absolutely have to master to succeed in your investments: acceptance of risk. You must learn to control your emotions and not care about the possible failures that you will endure. Your ability to bounce back is what will bring you success, not your desire to succeed immediately.

Lesson №6: Work to Learn — Don’t Work for Money

BECOME AN EXPERT IN MARKETING, MANAGEMENT, AND COMMUNICATION.

Schools train professionals who become so specialized in a particular field. That they no longer know how to cope in any other and they then need to unionize to protect their work. Specialization is not necessarily the optic that we are interested in; it is more important to retain the essential lessons in every field to master the 20% that provides 80% of the added value of your future business! This is this kind of teaching that Rich Dad passed on to Robert and Mike. Mike went on to take over the empire that his father left him. While at the same time Robert created his own empire through real estate, launching new products and educational programs.

10 Steps to awaken your financial genie