Rich Dad Poor Dad

By Robert Kiyosaki

Short summary

“Rich Dad Poor Dad” by Robert Kiyosaki book is one of the foundational texts on the path to financial freedom. It compares the lessons Robert learned from his 2 dads. His rich dad (his best friend’s father) and his poor dad (his biological father), they both had very different views of financial freedom and life in general. 

The book emphasizes the importance of financial education and the difference between working for money and having money work for you. It encourages readers to develop an entrepreneurial mindset and to think differently about money and investing. 

The book has become a classic in the personal finance genre and has sold millions of copies 

“Rich Dad Poor Dad” Takeaways

More on Debt and Income

• Good debt vs bad debt. Good debt would be the one that will enable you to acquire an asset (like getting a loan from the bank to acquire an investment property that will generate cash flow). Bad debt would be, for example, taking a loan to get that fancy car you have been dreaming about. If you are into sports cars, it may give you temporary excitement, however that debt is not generating income in fact it will generate further expenses (taking money out of your pocket). From Kiyosaki’s perspective that would become a liability.
• Develop multiple streams of income. Kiyosaki encourages readers to diversify their income streams, such as having a job, a business, and investments, to increase their financial security. For Kiyosaki, being an entrepreneur is a great way to achieve financial freedom. 
• Finally, do not underestimate the importance of starting to build your team of advisors and mentors. Having a team of advisors, such as accountants, attorneys, financial planners, bankers, insurance brokers and mentors to help manage one’s finances is definitely a must.

More on the 4 CashFlow Quadrants 

1. The Cashflow Quadrant. According to Kiyosaki there are four types of people, two in each category. On the left side of the quadrant are Es (employee) and Ss (self employed). They pay the most in taxes and trade their time for money. On the right side of the quadrant are Bs (business owner) and Is (investors). They pay the least in taxes and create or invest in assets that produce cash flow for them even when they’re sleeping. Each quadrant has a different mindset about money. Kiyosaki encourages people to move from being on the Employee Quadrant towards the Investor Quadrant, by building assets, diversifying their income streams, and being an entrepreneur. More on this below
2. Employee Quadrant: This quadrant represents people who work for someone else and receive a steady paycheck. They typically are heavily dependent on their employer for their income.
3. The Self-Employed Quadrant: This quadrant represents people who own their own business or are self-employed. They may have more control over their income, but they also have more financial risks and responsibilities. They are active in their business. Most likely income generation depends on their own time put into the business. If they are sick, for example, likely less income will come in.
4. The Business Owner Quadrant: This quadrant represents people who own a business and have employees working for them. They have more control over their income and more potential for financial growth, but they also have more responsibilities and risks.
5. The Investor Quadrant: This quadrant represents people who invest their money in assets such as stocks, bonds, and real estate. They have the most potential for financial growth, but they also have the most risk. 

Quotes that resonated with me:

• “Don’t let the fear of losing be greater than the excitement of winning.”
• “The difference between a rich person and a poor person is how they handle fear.”
• “The more you know, the less you need to fear.”
• “The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant.”
• “The size of your success is measured by the strength of your desire; the size of your dream; and how you handle disappointment along the way.”
• “The rich don’t work for money, they make money work for them.”
• “The only difference between a rich person and a poor person is how they use their time.” 
• “Financial freedom is available to those who learn about it and work for it.” 
• Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.”
• “The rich focus on opportunities. The poor focus on obstacles.”
• “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
• “The rich are always looking for investments. The poor are always looking for work.”
• “The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets.”
• “Your home is not an asset, it’s a liability.”
• “The reason I have financial security is because I have assets that generate cash flow. The reason most people have financial problems is because they have liabilities that generate expenses.”

“Rich Dad Poor Dad” Practical Advice

• Start educating yourself about money and investing. The first step in achieving financial success is to acquire financial knowledge. This can be done by reading books, attending seminars, or taking classes on personal finance and investing.
• Pay yourself first and ensure you start saving now. Aim to live below your means. Small savings today can make a difference in the long term.For example, if you decide to skip your daily 5$ Starbucks coffee ( and make it at home) that could get you over $120K in 25 years (invested in the stock market at 6% per year). That is just a simple thing you can save on. Do the math, if you start looking for other small saving opportunities, they can take you far.
• Start building assets: such as rental properties, businesses, and investments, rather than just saving money. 
• Start tracking your cash flow, which is the amount of money coming in from investments and other sources of income. Be consistent and patient. Wealth building is a long term journey.
• Start using OPM (leverage) to increase your returns. A good example would be, getting a loan to buy a house with 2 units ( instead of a single family home). You can live in one unit  and rent the other one. Your tenants will help pay down your loan faster. You have used OPM to start acquiring assets. Other ways to use OPM are: forming a partnership with someone who has access to money and can help finance a venture or investment or  getting  a line of credit from a bank and starting your business. 

More Advice

• Start diversifying your income streams. Maybe start a side job, and start building your dream business on the side. No need to leave your job yet. 
• Start being an entrepreneur. This is a mindset change first. Start thinking in ways how you can use your knowledge or experience and monetize it. If you love gaming and know lots about a specific game ( or 3D printing, or snowboarding, fitness, or anything really), maybe start a you tube channel or a blog about the game. Your passion for it will keep you going, other game lovers will likely join your blog/channel and suddenly advertising or affiliate income will start to flow in. You can create several sites at the same time (cost is very low) and start trying new ideas. 
• Start building a financial team. Don’t delay this step. Start by talking to people that do what you would like to do. Focus on people that have done it successfully already, and maybe less on the ones that have only read or watched Youtube videos about it :-). Start asking questions. That will lead you to speaking with financial advisors, bankers, insurance agents, accountants. All these professionals already talk to other people that have succeeded and even failed as well – that experience is priceless.

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