6 Lessons From Rich dad Poor Dad — A book that changed my Life

The truth is that the hype that has been created around this book is huge as it is one of the largest and most timeless best-sellers of its kind, it has been translated into dozens of languages ​​and is suggested by many “gurus” of the genre out there.

Does it justify it, though? Is it as good as it sounds?

Continue reading the article as it will be followed by an extensive summary of the book and a concise analysis of the 6 basic lessons it wants to teach us.

The real juice, as always, is hidden in the real book. If you want to understand 100% of what the author wants to tell us, you have to read the whole thing.

Rich Dad’s book Poor Dad chronicles the author (Robert Kiyosaki) growing up with 2 fathers. His real father (the “poor dad”) and the father of his best friend (the “rich dad”). Our book shows the different beliefs, attitudes, and habits of the two fathers regarding money, entrepreneurship, and investment and how they influenced the course of each person’s life.

Perhaps the main message of the book is that the rich do not work for money. Instead, they make their money working for them. Anyone who understands this can become rich without necessarily having a very high income.

The story of the book revolves around the life of Robert Kiyosaki as he grew up in the city of Hilo on the island of Hawaii. Robert was born in 1947 and, by chance, started attending the same public school with children from very wealthy families. As you can see, since children are the hardest keys out there, the first cases of bullying were not long in coming. Robert did not have the newest toys that everyone else had, nor could he follow them on the cool bike rides that their parents bought them.

Driven by childish jealousy because he was not invited to a children’s party on the pretext that there were no “poor children” and determined to change everything, Robert goes to his father one day and asks him categorically:

“Dad, can you tell me how to get rich?”

His father, apparently not knowing what to say to him, said to him:

“If you want to get rich, my son, you have to learn to make money.”

And how will he make money?

“You have to use your mind! Study a lot, get very good grades, do a master’s degree and look for a stable and secure job that will always give you money.”

Introducing Kiyosaki’s real and biological father, the poor dad.

Robert was not alone. He had a friend, Mike.

Mike was also a co-recipient of bullying as he was not one of the rich kids at school. One day they sat together, as friends, and decided to find a solution to the problem:

“What do we have to do to make money?”

“I do not know, but do you want to be my roommate?”

And so they decided to become partners and discover together how to make themselves rich.

Their desire led them to Mike’s father who, from that moment on, became their personal Mentor, constantly giving them advice and lessons on how to become rich.

So he became Robert’s second father, the rich dad.

Photo by Robert Collins on Unsplash

While his biological father had gone through many universities, had a Ph.D., and always had good grades, the latter had barely finished elementary school.

Both are extremely successful in their careers and, at the same time, workaholics. The former struggled to make ends meet throughout his life while the latter managed to become one of the richest people in Hawaii.

The rich dad was the one who laid the foundations of financial and business education for the two children by giving them experiential lessons and passing on the basic principles.

The first 6 chapters of the book tell us about 6 basic lessons that the rich dad taught his children which, as the book claims, remain from time immemorial to this day.

Lesson 1 — The Rich Do Not Work for Money

People’s lives are dominated by 2 basic emotions, fear, and greed. The fear of not having money motivates you to work even harder to earn money. The more you work, the more money you receive. The more money you make, the more greedy you become looking for cheap dopamine in the consumption of goods and services.

This magnifying glass makes overconsumption, and addiction and puts you on a new “trip”, that of LifeStyle Inflation. The more money you make, the more you upgrade your lifestyle, increasing your expenses.

Your finances can be plotted in the following equation:

Total Income = Total Expenses

Unfortunately, in some cases, the hunt for “cheap dopamine” offered by over-consumption can turn the above equation into inequality with your total expenses exceeding your income.

This is exactly the phenomenon of the “Rat Race” to which the author refers in the book.

The fear of losing what you have and the greed for overeating trap you in an endless loop (or, in other words, an “endless magnifying glass”) where you work only for money. You become a slave to money, a slave to your work.

According to Robert, work can only provide a short-term solution to a long-term problem. That of creating wealth, that is, increasing your net worth.

By this, he means that most people are preoccupied with short-term problems such as paying their bills, rent, or a new TV.

Money dominates their lives and they do not have time to think one step further. They can not think of alternative ways and possible opportunities out there as they seek only money and security.

And that’s exactly what they get!

Main Message:

The title of the chapter refers to the fact that the rich do not work for money. They work to learn, to gain valuable knowledge and experience, in order to make money work for them. He states that the poor and the middle-class work for money. The rich class works to put their money to work for her.

Lesson 2 — Why do we teach Economic Education?

According to Robert, the education system today is structured in such a way that it is a perfect mechanism for producing workers.

If you want to take a different path and become a successful entrepreneur or learn to manage your money the right way you will have to find ways to develop these skills on your own, without his help.

A building block of financial education that no one at school teaches you is the separation of Assets from Liabilities.

What are these;

You may think that anything you add to your fortune can fall into one of two categories:

Having it adds money to your pocket

Having it takes money out of your pocket

If something adds money to your assets in the form of income, value increase, or both, then it is an Asset.

If something takes money away from your assets in the form of direct expenses or a reduction in its value, then it is a Liability. You can think of these two categories as two columns where you can place everything you have in your possession.

Assets and Liabilities — Rich Dad, Poor Dad

Want to see some examples?

A car, from the moment you buy it, constantly loses value and, in addition, costs you in taxes and maintenance. This means that it is a sample of Liability.

An ETF with shares of companies from developed and developing countries, such as Vanguard’s VWCE, constantly offers income (in the form of dividends) and at the same time increases its value (through revaluation). This means that it is a steady sample of Assets.

Perhaps the most ambiguous reference in this book is to whether the home you live in is an Asset or a Liability.

The author claims that the house you own and live in is a Liability as it does not offer you money. On the contrary, it constantly demands money for maintenance reasons (damages, repairs, renovations) but also for taxation.

The truth is that if the costs required to maintain your home are higher than the increase in its total value, then it is a Liability for your balance sheet.

Kiyosaki tells us that the poor tend to buy Liabilities, the rich tend to buy Assets while the middle class tends to buy Liabilities as Assets.

Main Message:

Clarify the meaning of Assets and Liabilities in your mind. If you want to become really rich you need to focus your efforts on getting more and more Assets in your assets, limiting liabilities as much as possible.

Lesson 3 — You look at your Work

When he was a child, his poor dad advised Kiyosaki to find a “good and safe job”. On the other hand, his wealthy father advised him to start accumulating assets in his possession as soon as possible.

Kiyosaki proposes to acquire Assets that belong to the following 7 categories:

• Businesses that do not require an active presence in their management
• Shares
• Securities
• Mutual funds
• Real estate that returns income
• Bonds
• Royalties from intellectual property (Music, Books, etc.)
• Anything else that has monetary value, generates income or gains

goodwill and can be liquidated immediately (for example Cryptocurrencies, digital assets such as Blogs, YouTube Channels, etc.)

The author considers that every dollar (or Euro) that enters the column of his assets is, in a way, an “employee” who works daily and uninterruptedly for him and “produces” even more dollars.

Main Message

Your goal should be to add money to your Assets column by constantly acquiring more and more assets that will generate income (or increase their value) for you, without you.

Lesson 4 — The History of Taxation & The Power of Societies Anonymes

One issue that many people who want to get involved in entrepreneurship and investment tend to go into “minus” is taxation. They do not know what to pay, when to pay it, and, worst of all, why they should pay it.

One structural observation, which pushed me even more toward personal business, is the difference in tax time when we talk about an employee and when we talk about a business.

What I mean;

Think you are an employee and you receive your salary every month. The money you receive is already taxed by the state.

The order of things here is as follows:

First, you get paid, then you are taxed, and, finally, you spend what is left.

On the opposite bank, this is not the case for businesses.

The order of things for businesses is as follows:

It first collects its Income, then Spends making the necessary expenses to maintain, and, finally, Taxes what is left.

Employee and Business Taxation — Rich Dad, Poor Dad

Did you notice a slight difference here?

If you are an employee, then you will necessarily have to be taxed on all of your income. If your gross is € 2,000 per month

If on the other hand, you are a business, you can spend, practically, tax-free money.

If you are a freelancer, your car gasoline is not a personal expense, but a professional one. Your office cleaners may include your home cleaners. The Work Laptop can also become a personal Laptop.

All of the above can be considered business expenses and can be done with pre-taxed money.

In the book, Kiyosaki pulls it off a bit and tells us that he once bought a Porsche with money from his business.

I do not know whether such a thing is possible. And when I say possible, I always mean, without the taxman knocking on your door.

Main Message:

It is important to understand how the tax system works and how we can take advantage of it. Its effects, in the long run, can be great.

In the book, Kiyosaki pulls it off a bit and tells us that he once bought a Porsche with money from his business.

I do not know whether such a thing is possible. And when I say possible, I always mean, without the taxman knocking on your door.

It is important to understand how the tax system works and how we can take advantage of it. Its effects, in the long run, can be great.

Lesson 5 — The Rich Invent Money

With the expression “the rich invent money” Kiyosaki wants to tell us that some people have the financial and business knowledge and insight needed to be able to recognize investment opportunities everywhere.

Before we talk more about this, let’s look at the 2 categories of investors according to the author:

Those who buy investment packages

Those who create their own investments

By investment-packages, it refers to the classic path taken by someone who wants to invest.

He goes to a Broker (online or physical), consults him (or not), and buys the investment instrument of his choice. This could be a stock, an ETF, a government bond, a cryptocurrency, and so on. It is the category with the most investors and compares to a consumer who enters an electrical store to buy a computer.

The second category includes those who are constantly looking for the market, recognizing possible opportunities, composing all the pieces, and creating their own investments.

In this category, you will find far fewer investors and Robert will liken it to a tech geek who will assemble his own computer by buying accessories, one by one.

To be able to triumph in this category, the author tells us that you must have 3 common characteristics:

Have a financial perception so that you can recognize possible opportunities

that others do not see

Be able to find funding

To be able to organize smart and capable people

Main Message:

The rich invent money in the sense that they can “synthesize” their own investments by recognizing potential market opportunities and organizing the right people to seize them.

Lesson 6 — Work to Learn — Not Money

According to the author:

“The more capable (in his field) my poor father became, the harder he worked. At the same time, the more he specialized, the deeper he sank into the (Rat Race) trap. “As his salary increased, so did his options.”

So when the time came and he was fired, he discovered how professionally vulnerable he was. His position disappeared and the oriented skills he developed were not supplies for the future.

On the other hand, his rich father encouraged him to learn “a little of everything”. He told him that he must learn to work with people smarter than him, unite them, and to be able to “take advantage” of the multiplier effect they produce.

The author, therefore, advises us to choose a job based on the Skills we want to get and not only based on the salary she gives us. When we get this skill we can move on to the next branch.

If, well, we have to choose a field to become a specialist, he believes that this should be the field of sales, marketing, interpersonal relationships, and market understanding.

It’s time for my input here:

The truth is that I quite agree with this logic and it is the one that I apply in my own professional life.

As a freelancer, you can only be a “Jack of all trades” and spread risk to both customers and Projects and the respective channels where you are active.

BUT…

We can not ignore the fact that the specialists, the Ph.D. holders, and the scientists who dedicate their lives to research, are the ones who each offer, little by little, a little stone in our culture.

If you now put all these little stones together, from the beginning of the human species, they are what brought us to where we are at the moment.

And it is these little stones that come and are “exploited” by entrepreneurs and investors, compose their own mix and go to market in order to monetize it and accumulate wealth.

No road is bad and no road is good.

It is simply a matter of goals and choices.

Main Message:

The author considers that it is more profitable to gather many different experiences from professions and occupations than to dedicate yourself to a single profession.

If you choose the path of a profession, it will lead you to become a specialist in that field which, in all probability, will lead you to the path of the employee who will trap you in the futility of the “Rat Race” we mentioned.

My opinion

Let’s get to the heart of the matter: Would I recommend the book?

I think that in general this book can help a beginner a lot and I would definitely recommend it for a read.

First, it will give you a boost of motivation to start thinking more about the issue of your financial freedom and your conscience on the issue of money and wealth.

Second, it will teach you some basic (but very important) concepts such as the difference between Assets and Liabilities, Income and Wealth, and how you can turn the money you receive into wealth.

If you are now a child of the Internet, reading this story, following Bloggers, YouTubers, and Influencers around the world of Personal Finance and Investment, and have read a few other books then this book does not have to teach you any particular new concept.

Now let’s go to the negatives:

Yes, I would like to talk about the elephant in the room.

I can only admit that the figure of Robert Kyosaki is very disgusting to me and his persona really brings me.

It is also important to mention that I firmly believe that what the book says is not a one-way street.

You do not have to own a large business with 100 employees to be rich. Nor is the employee’s path necessarily something that will trap you in the “Rat Race”.

On the contrary, I believe that you can take advantage of other avenues (passive investments from an early age + interest rate = LFE) to achieve this without having to take the big risk that goes hand in hand with business.

Anyway, that’s my opinion. In order to be able to get yours, you will have to read his book.

And if you do, keep the ones that suit your temperament and let everything else come in and out of your mind.