6 Key Lessons From Rich Dad, Poor Dad

As many high school students make their college decisions, the debate continues on the link between higher education and future success. While colleges may enable students to pursue rewarding careers, many graduates may still lack the financial literacy and knowledge to develop wealth. As author, Robert Kiyosaki, describes in his book Rich Dad, Poor Dad, higher education and a job dont guarantee wealth. Its the application of financial knowledge, which separates the wealthy from the lower class. Robert Kiyosaki compares two case studies of financial knowledge through his two dads. The first being his Poor dad, his biological father who was a well-educated, highly paid government official and the other being his Rich dad, a close mentor who owned a successful business despite only having an 8th grade education. Although the well-educated biological father had a high paying job, he was constantly struggling with debt and paying off most of his expenses. The business owner, however, developed a fortune allowing him to live comfortably and not be concerned with current expenses. This goes against common logic where job security and income are the key markers to wealth. As Kiyosaki illustrates through his two dads, income isnt everything, its the approach to money and wealth that is life changing. Kiyosaki provides readers with 6 main lessons of the wealthy to help provide guidance. Lesson One: The Rich Dont Work for Money There are two main emotions which can prevent people from developing wealth: fear and desire; fear of not being able to pay monthly expenses or fear of losing money keep many entrenched in the day-to-day work, preventing many from evaluating investments and other sources of income. The desire to keep up appearances via buying expensive clothes or cars drives expenses so high that people have no choice but to stay focused on their jobs to maintain their lifestyle. Lesson one is all about understanding those two emotions and stopping them from hindering ones success. The Rich Dad was more focused on ways of creating residual money, money that increases even if you dont work, rather than waiting for the next job with a pay raise. - See more at: http://madamenoire.com/109049/6-lessons-from-rich-dad-poordad/#sthash.0AMTmz3Q.dpuf Lesson Two: Learning Financial Literacy? Developing financial literacy is key to having any success with money. Financial literacy is simply the study of managing ones finances. Robert Kiyosaki breaks down the basics of financial literacy in order to show the differences in cash flow for different income levels. There are a few key terms one would need to understand in order to see differences. Income is simply the amount of money you earn (wages, salaries, etc.). Expenses are things like (taxes, food, rent, clothes, fun, and transportation). An asset is something that puts money into your

pocket (stocks, bonds, investments). A liability is anything that takes money out of your pocket (home mortgages, loans, credit card debts.) The best way to understand the difference between the haves and have nots are through situations shown below: This is the situation for those in lower income brackets: Job (providing income) is less than expenses (taxes, food, rent, clothes) No Assets, No Liabilities Compare that situation to the wealthy: Assets (stocks, bonds, notes, intellectual property) are greater than income (from job) No Liabilities To put it simply, the rich are able to live well off of the returns from their investments such as stocks and bonds covering any expenses. While a poor person is using the majority of his wages to pay for his prospective living expenses. In order to become wealthy, one must focus on increasing his assets (investments) rather than focusing on increasing his income (pay raises). Lesson Three: Mind Your Own Business As mentioned in the previous lesson, the key attribute that must be developed in order to gain wealth is to focus on your asset column. The rich focus on improving the size of their investments rather than simply waiting or demanding pay raises in their income. This means keep your expenses low, reduce your liabilities and diligently build a base of solid assets. Lesson Four: The History and The Power Of Corporation This is the power of limited liability. By creating a personal corporation, the rich are able to avoid many of the personal taxes the poor face through corporate exemption. However, please note the word avoidance compared to evasion! Avoidance simply means using loopholes in tax laws to your advantage where evasion is simply not paying taxes at all, which is illegal. By filing as a corporation, the rich are able to mitigate their losses to only the amount they invested in the corporation. They are able to pay taxes after they pay for expenses. For people who have jobs, its the opposite case where taxes are taken out of paychecks before one is able to cover expenses. In Comparison: The Rich People with Corporations 1. Earn 2. Spend 3. Pay Taxes

The People who work for Corporations 1. Earn 2. Pay Taxes 3. Spend Lesson Five: The Rich Invent Money The idea behind this is that wealth takes a combination of financial intelligence and a little bit of guts. The one thing that holds a lot of people back is some degree of self-doubt. In order to gain wealth, there needs to be a degree of self-confidence. This means investing money outside of the comfort zone. While saving at the bank seems secure, it is not worthwhile because savings rates are often below the rate of inflation. As a Young Jeezy rap lyric once goes, Scared money dont make money. Kiyosaki follows the same logic, if you truly want to see your investments grow exponentially you must be willing to put in the money in places that show relative risk. Lesson Six: Work to Learn- Dont Work for Money A familiar acronym for job is just over broke. Oftentimes, its easy to get caught up in a job as a means of security or money. However, the rich use jobs as learning opportunities to develop necessary skills to be successful. As Kiyosaki recommends in the book, take a long view of life. Instead of simply working for the money and security, which are important, take a second job or take classes that will teach you a skill. He goes even further to describe the three main management skills necessary for success: 1. 2. 3. The management of cash flow (assets and liabilities) The management of systems (basic economic theory, political landscape, etc.) The management of people

If one is able to focus getting jobs that develop these three major skills sets, he is well on their way on the path to success. After sharing these main lessons of the rich, Kiyosaki goes a step further by addressing the 5 main obstacles keeping people from actually following through. 1. Fear- Overcoming the fear of losing money. The fear of losing money is real. Everyone has it. The difference becomes how a rich and poor person handles the fear. Wealthy individuals use failure as a teaching moment and arent afraid to fail. 2. Cynicism- This deals mostly with those around you. Follow your own path, because at the end of the day, wealthy individuals are a small percentage who go against the grain and dont follow the crowd 3. Laziness- One must be willing to put in the time and effort to build up their financial knowledge. This means being selfish and taking time out to build ones personal wealth. 4. Bad Habits- Reducing expenses is easier said than done, but one must be willing to break those bad spending/investing habits in order to be successful

5. Arrogance- Always be willing to reach out to those who are successful and those you want to emulate. To become wealthy, its often a collaborative effort, bouncing ideas from prospective mentors. With these main lessons in mind, one can walk towards the path of success. It just takes personal initiative to further develop the financial knowledge and management skills necessary for success. As Rich Dad, Poor Dad shows, higher education or a great job doesnt guarantee success but rather the skills and knowledge you are able to apply with your income separates the lower and middle class from the wealthy. - See more at: http://madamenoire.com/109049/6-lessons-from-rich-dad-poordad/6/#sthash.OB7O9DxD.dpuf

Rich Dad, Poor Dad

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Author Country Language

Robert Kiyosaki United States English

Genre(s)

Novel

The book is the story of a person (the narrator and author) who has two fathers: the first was Publisher his biological father the poor dad - and the other was the father of his childhood best Released April 1, 2000 friend, Mike the rich dad. Both fathers taught the author how to achieve success but with Media Type Hardback & Paperback very disparate approaches. It became evident to the author which father's approach made Pages 207 more financial sense. Throughout the book, the author compares both fathers their ISBN ISBN 0446677450 principles, ideas, financial practices, and degree of dynamism and how his real father, the poor and struggling but highly educated man, paled against his rich dad in terms of asset building and business acumen. The author compares his poor dad to those people who are perpetually scampering in the Rat Race, helplessly trapped in a vicious cycle of needing more but never able to satisfy their dreams for wealth because of one glaring lack: financial literacy. They spend so much time in school learning about the problems of the world, but have not acquired any valuable lessons about money, simply because it is never taught in school. His rich dad, by contrast, represents the independently wealthy core of society who deliberately takes advantage of the power of corporations and their personal knowledge of tax and accounting (or that of their financial advisers) which they manipulate to their advantage. The books theme reduces to two fundamental concepts: a can-do attitude and fearless entrepreneurship. The author highlights these two concepts by providing multiple examples for each and focusing on the need for financial literacy, how the power of corporations contribute to making the wealthy even wealthier, minding your own business, overcoming obstacles by not fostering laziness, fear, cynicism and other negative attitudes, and recognizing the characteristics of humans and how their preconceived notions and upbringing hamper their financial freedom goals. The author presents six major lessons which he discusses throughout the book:

The rich dont work for money The importance of financial literacy Minding Your own business Taxes and corporations The rich invent money The need to work to learn and not to work for money

Contents

1 Character Summaries o 1.1 Poor Dad

1.2 Rich Dad 1.3 The Son (Robert T. Kiyosaki) 2 Chapter Summaries o 2.1 Chapter 1: Rich Dad, Poor Dad o 2.2 Chapter 2: The Rich Dont Work for Money o 2.3 Chapter 3: Why Teach Financial Literacy o 2.4 Chapter 4: Mind Your Own Business o 2.5 Chapter 5: The History of Taxes and the Power of Corporations o 2.6 Chapter 6: The Rich Invent Money o 2.7 Chapter 7: Work to Learn, Dont Work for Money o 2.8 Chapter 8: Overcoming Obstacles o 2.9 Chapter 9: Getting Started o 2.10 Chapter 10: Still Want More? Here are Some To Dos 3 Themes in Rich Dad, Poor Dad 4 External Links

o o

Character Summaries
Rich Dad, Poor Dad revolves around three main characters: poor dad, rich dad (Kiyosakis second father) and the son (the author himself as narrator of the book). The essence of each character is:

Poor dad educated but lacking the street smarts Rich dad very little education (eighth grade), tons of street smarts Kiyosaki the spectator who learns lessons from both but internalizes only rich dads traits

Poor Dad

The author compares his poor dad to the millions of fathers who encourage their sons to do well in school so they could get a good job with a good company. Poor dad believed in the traditional principles of working hard, saving money, and not buying material things that one cannot afford. He believed that having a good job with a solid company is what one should aspire for; hence he expresses disappointment when his son leaves the employ of a large, reputable corporation. Poor dad looks to education as the passport to success. He held a doctorate degree, went to Ivy League universities, but was always struggling financially. He believed he would never be a rich man and the author points out that this became a self-fulfilling prophecy. Poor dad was more interested in a good education than the subject of money. The author wrote that his poor dad would always say things like, Im not interested in money or money doesnt matter. The author points out that poor dad was preoccupied with things like job tenure and security, Social Security, vacation and sick leaves, company insurance and salary raises and promotions. The author felt that his poor dad was more interested in these factors rather than on the job itself.

This is what the author calls being trapped in the Rat Race. His poor dad worked hard incessantly but somehow never made it ahead financially. Poor dads approach to the subject of money was based on working hard to have enough money to pay the bills (in contrast to rich dads approach to make ones money work for him).

Rich Dad

The author wrote that it was when he was nine years old that he started realizing that his rich dad made much more sense than his poor dad. It was from rich dad that the author learned not to say, I cant afford it, but instead to ask, how can I afford it? He explains this principle by relating an incident when he and his best friend Mike went to work for Mikes father. Rich dad paid them very low wages deliberately so that would stir anger and a sense of injustice in them and eventually for them to realize that in order to get ahead, one must work for himself and not for others. For example, in that part of the book when the author complains to rich dad that he can hardly afford to buy anything with the wages he is paid, rich dad tells him that he shouldnt dwell on the fact that his wages are low, but instead ask how can I make more money because this stimulates the brain to take action. His rich dad says that when someone says, I cant afford it, his brain stops working. It therefore kills initiative and promotes passivity. The author adds that while his poor dad invested time and effort in education, he did not have any knowledge on investing. His rich dad, by contrast, was very skilled in the investment game because thats all he did. The attitude of his rich dad about money was manifested in the saying the lack of money is the root of all evil (his poor dad, on the other hand, believed that the love of money is the root of all evil). According to the author, rich dad also nurtured the idea that taxes punished producers and rewarded the non-producers. He was the type who encouraged money talk at the dinner table and was portrayed by the author as someone who learned to manage risk, instead of not taking risks.

The Son (Robert T. Kiyosaki)

The author begins his book, Rich Dad, Poor Dad, by saying that he is fortunate in having had two fathers. He learned valuable lessons from both of them, but in Chapter One it becomes evident which father had the more sensible approach towards money. He compares and contrasts both fathers views about working hard, getting an education, saving and investing and realizing how habits of the rich and poor significantly differ. He attributes his financial acumen through the many conversations he carried out with his rich dad. The author takes a common sense approach to the subject of money and emphasizes the need for accounting knowledge so that the reader clearly understands what assets and liabilities are. He makes simple diagrams that show the inflow and outflow of money and how the rich build up the asset column and the poor build up the liability column (expenses). It is obvious that the author

places much importance on accounting knowledge no matter how boring it is - because he says it is the most important subject in your life. By using numerous examples and anecdotes, the author drives home his messages effectively, revealing his pro-capitalist stance. The author also shows his understanding of the mechanisms employed by the government and the tax man and concludes that it is the middle class that actually pay for the poor. The rich are the ones who are hardly taxed because they have the knowledge to use tax legislation to their advantage.

Chapter Summaries
Chapter 1: Rich Dad, Poor Dad

The story of Robert Kiyosaki and Mike starts in 1956 Hawaii, when both boys were a nine years old. Their first get-rich scheme was a counterfeit nickel making company. They made plaster molds of the nickels and melted lead toothpaste tubes and filled the molds to produce the nickels. Their plan was foiled by Mike's father, who informed the boys of their illegal activity. After that day, the boys dedicated their free time to leaning about finance and economics from Mikes father, the rich dad. The first lesson Mikes dad made the boys experience was hatred of the Rat Race. He was able to achieve this by making the boys work in one of his grocery stores for three hours for ten cents an hour pay. Within a few weeks, Kiyosaki, tired of being exploited for labor, demanded that he receive a raise, but instead, Mikes father cut his pay and told him to work for free. Eventually, both boys tired of being under appreciated (and unpaid) and they met individually with Mike's father. In their meetings with rich dad, he apologized for lack of pay and he offered them either the moral of the lesson or a pay raise. Both boys chose to learn the moral of the lesson, while rich dad offered them pay raises. He started at twenty-five cents, a dollar, two dollars, and even five dollars, which would have been considered a large amount of money for an hourly wage, but the boys still remained strong with their decision to learn the moral of the lesson. The lesson to get out of the Rat Race and instead of spending your whole life working to put a little money in your pocket and a bunch of money in someone elses pocket, have people work hard to put money in your pocket. Out of all the lessons that were taught to the boys, this one was the most important. (Kiyosaki and Lechter 28-35)
Chapter 2: The Rich Dont Work for Money

The author tells his readers to forget the notion that life teaches. He says the only thing that life does is push you around. This chapter talks about people who are more comfortable in playing it safe because they were not taught early to take risks. The author develops the ideas that the poor and the middle class work for money, fear and greed cause ignorance and poverty, and the importance of using ones emotions versus thinking with emotions. The author also stresses that opportunities in life come and go; the rich recognize them instantly and turn them into gold bullions. Others do not see

these opportunities because theyre too busy seeking money and security. As the author says, well thats all theyre going to get.
Chapter 3: Why Teach Financial Literacy

The story of Kiyosaki and Mike continues later in life, 1990, and both of the now adults have made incredible leaps and bounds with regards to their finances and their socioeconomic status. Mike was able to take the lesson from his father and apply them to his life. He took control of his fathers large business and increased every aspect of the empire and he is currently raising his son to take control of the company once he retires. As for Kiyosaki, he was able to retire at the age of 47 with his wife Kim. At a business meeting at the Edgewater Beach Hotel in Chicago, Charles Schwab, Samuel Insull, Howard Hopson, Ivar Kreuger, Leon Frazier, Richard Whitney, Arthur Cotton, Jesse Livermore and Albert Fall met to talk about different investments and money schemes. Twenty-five years later, a report stated that a large majority of those extremely wealthy people that met in Chicago either ended up in jail, dead or penniless. The major idea to take from the results of these unfortunate entrepreneurs is that you need financial literacy to be and stay safe. The idea that was represented with the big 1920s entrepreneurs is still prevalent today with some of the professional athletes making poor financial decisions and ending up with next to nothing. This specific lesson is meant to teach people not to be wise with your money once you have it, but rather be smart with your money before you have it. In a way, dont try to build a skyscraper or even a house without building a strong foundation first. According to Kiyosaki, there is one rule, and only rule that can help a person to build a strong foundation; know the difference between an asset and a liability, and make sure that you only control assets. (Kiyosaki and Lechter 56) When it comes to beliefs about money buying freedom and the ability to enjoy retirement without fear of outliving ones money, this chapter catches the essence of the authors advocacy for financial independence. He says, Intelligence solves problems and produces money. Money without financial intelligence is money soon gone. The author believes that financial literacy begins with a working knowledge of accounting. It is essential to know the difference between assets and liabilities. To make these two terms understandable to readers, the author makes a rudimentary diagram of these two concepts to motivate them to purchase assets in order to solidify the asset column, while keeping the liabilities (expenses) to a bare minimum. The author states that poor people remain poor because they do the opposite. They pile up on their liabilities and have zero assets so that their balance sheets and income statements look out of kilter. People have to understand that its not how much they make, but how much they keep according to the author, and this is an essential principle that this chapter focuses on.
Chapter 4: Mind Your Own Business

In this chapter, the author slowly introduces the concept of real estate investing and uses McDonalds as an example. He points out that McDonalds may not make the best hamburgers in the world, but owns the most valuable intersections and streets in America. The author remarks that individuals need to mind their own business if they wish to become financially self-

sufficient. They shouldnt mind their employers business, they should strive for ways to become their own boss and nurture their own businesses. The author continues his discussion on building assets. To him, real assets are anything with value stocks, bonds, mutual funds, income-producing real estate, notes, royalties from intellectual property, etc. This chapter also reveals the authors investment preferences: real estate and stocks. For real estate, he says he starts small, and trades his properties for bigger ones and then delays paying taxes on capital gains through one IRS mechanism.

Chapter 5: The History of Taxes and the Power of Corporations

The author states that the poor let the big machinery (corporations) manipulate them whereas the rich know how to use big machinery. This means that the rich possess the knowledge and savoir faire to use the power of the corporation to protect and enhance their assets. The advantage of a corporation versus that of the individual lies in how corporations pay taxes, according to the author. He makes this point clearly: individuals earn money, pay taxes on that money, and live with whats left. The corporation, on the other hand, earns money, spends everything it can, and is taxed on anything thats left. The author adds that individuals may not be aware of how much theyre being manipulated; they work from January to mid-May to enrich the government by paying taxes on their income. In the meantime, the rich are hardly taxed. The author recommends developing ones financial IQ as one way of leaving the humdrum of daily existence. This is accomplished by gaining knowledge of accounting, investing, understanding the markets, and the law. He says being ignorant gets you bullied whereas being informed translates into you have a fighting chance.

Chapter 6: The Rich Invent Money

The author develops the concept of self-doubt. He says that each person is born with talent but that talent is suppressed because of self-doubt and fear. He remarks that its not necessarily the educated smart people who get ahead but the bold and adventurous. People never get ahead financially even if they have plenty of money because they have opportunities that they fail to tap, he stresses. Most of them just sit around waiting for opportunity to happen. The authors idea is that people create luck; they should not wait around for it. He says its the same with money. It has to be created. In this chapter, the author discusses the importance of an education (although some critics say that he appears to downplay its importance). The author is clear by saying, a trained mind is a rich mind. In his analysis, there are two types of investors, each with a different mind set: those

who go for the packaged investment, and those who customize investments to suit their objectives. The author encourages people to hire people more intelligent than they because by capitalizing on the knowledge of others, an intelligent individual builds his own knowledge base and therefore has more power over those who dont know.
Chapter 7: Work to Learn, Dont Work for Money

This is the chapter where the author talks about the skills individuals need to develop for financial success. The reader is given an example of a young woman who had a Masters Degree in English Literature and who was offended when it was suggested that she learn to sell and do direct marketing. After all the hard work for her degree, she didnt think she would have to stoop so low to learn how to be a salesperson, a profession she didnt think very highly of. The author uses this example to emphasize that there are other skills people need to cultivate to help them on the road towards financial freedom. The author mentions management skills. He says individuals need to know how to manage cash flow, systems, and people. To that he throws in selling and marketing skills. He puts equal emphasis on communication skills. He says there are many people who have the scientific bent and hence have a powerhouse of knowledge, but they fail miserably in communications. These are the people who are one skill away from great wealth. The author calls attention to one outstanding trait of great wealthy families: they give money away plenty of it unlike the poor who feel that charity begins at home.

Chapter 8: Overcoming Obstacles

The opinion of the author is that five personality traits hamper human beings: fear, cynicism, laziness, bad habits, arrogance. He explains that while its normal to have fear, what matters is how one handles it. The author shares his sentiment about his particular fondness for Texas and Texans: When they win, they win big and when they lose, its spectacular. The author maintains that its not merely a question of balance but also FOCUS. He recommends that the Chicken Littles of the world be ignored. Theyre only concerned about the sky falling, spending the rest of their lives in pessimism. He says he constantly hears people saying they want to be rich, but when its suggested that money can be made from real estate, their initial reaction is but I dont want to fix toilets. The author believes its ironic that theyre more concerned about trivia like fixing toilets rather than what lies ahead in real estate. As a final point, the author states that it is healthy to be greedy, so when faced with a decision, a person must always ask, Whats in it for me?

Chapter 9: Getting Started

This chapter serves as a section on tips to create and build personal wealth. His first tip is, find a reason greater than reality to motivate you. What he means by this is to wake up the financial genius in oneself by empowering the mind. He says that people must have a strong /purpose for living. The next tip is to feed the mind. By feeding the mind, the author contends that people acquire power of choice. The author also advises people to choose friends carefully. He says to avoid people who proclaim incessantly that the sky is falling and instead encourages readers to spend time with people who enjoy talking about money because they may have valuable lessons to share. The author also believes that people should study one field, and then go out and learn a new one, although it is important to choose what one studies. Here is another tip that the author observes most people dont practice: pay yourself first. Even if short of cash, people must pay themselves first. This goes in tandem with managing three things efficiently: cash flow, people and personal time. Another tip the author gives is being generous. He thinks it makes a lot of sense to pay ones broker well as hes an ally, and your eyes and ears to the market. The author suggests having heroes. They are indispensable in life because they not only inspire, they also make it seem so easy. They stimulate the human mind into thinking, If they can do it, why cant I? Teach and you shall receive is another tip that the author shares. His words are eloquent concerning this idea: There are powers in this world that are much smarter than we are. You can get there on your own, but its easier with the help of the powers that be. All you need to be is generous with what you have, and the powers will be generous with you.

Chapter 10: Still Want More? Here are Some To Dos

This chapter is sort of a supplement to the previous chapter. It gives readers additional tips to help them reach for financial rewards. One tip is to stop doing what youre doing that is, if its no longer working or viable. The author encourages readers to look for new ideas, to pick the brains of individuals who have the experience and who have already done what one aspires to do. He advises on keeping the learning curve alive, taking courses, buying tapes, attending seminars.

In looking for real estate investment opportunities, the author recommends looking in the right places. One way of doing this is to jog around the neighborhood one is interested in. People can acquire real estate even if they dont have sufficient funds for the down payment. In fact, with a bit of cleverness, the author says people can even make money with no capital.

Themes in Rich Dad, Poor Dad

One theme thats apparent in this book is that for an individual to be wealthy, he must aim to own the system or means of production, rather than work for another individual. The author stresses that there is obviously something confining about being an employee; it shuts the mind to other possibilities and it stunts initiative. Financial intelligence is THE most powerful asset. By studying the precepts of accounting and investing, the author believes that individuals will be able to see the difference between an asset and a liability; in fact it is the more concrete application of learning whats right and whats wrong. Generating a string of expenses is wrong, building assets is right. Unlike individuals who earn and then pay taxes on what they earn, corporations earn, spend what they want to spend, and pay taxes on whats left. Corporations, therefore, hold a certain degree of power. The rich know how to use this power, the poor dont. The author also believes that true luxuries are experienced when they are the outward manifestations of intelligent investing and asset building. He cites the example of his wife purchasing a Mercedes Benz because it was the car she liked and worked hard to be able to purchase it. The author cautions however about keeping up with the Joneses and getting into debt because of this human frailty. Fear, laziness, cynicism and arrogance are to be blamed for most of human inaction.

Key Lessons from Robert Kiyosaki Rich Dad Poor Dad: What the rich teach their kids that you can learn too (review by Gil Dekel, PhD. Part 1 of 4.)

This is part 1 (of 4). Go to Part 2. As a self-made millionaire and a financial teacher, Robert Kiyosaki describes in simple terms some financial secrets that rich people know, and which will help you escape the rat race, and achieve financial wealth. Summarised by Gil Dekel, PhD. The numbers below are the pages numbers as they appear in the book (published by Time Warner Paperback, London, 2002). page 4 The average-educated and hard-working person will go to school, then find a secured job. 5 Then make some money, obtain credit cards, marry, buy a house, have a child. Then the demand for money grows. So the couple decide that their careers are important, and will work harder. Another child arrives, and more money is needed. Harder work. The income grows, but so does the tax to pay. This is the Rat Race of working hard, needing more money, and then working harder for the owner of a business; for the government (by paying more taxes), and for the banks (by paying off a mortgage and credit cards). 10 The education system does not teach finance. It teaches our children to play it safe; instead of play it smart. 12 To be an employee means to pay more than the fair share of taxes that one should pay over a lifetime, with little or no promise of a pension. Most families work January to mid May for the government just to cover the taxes they need to pay. 16 Is the love for money the root of all evil or is it the lack of money the root of all evil? 17 I cant afford it is a statement that stops our brain from working. How can I afford it? Is a question that makes us think, and puts our brain at work. The most powerful computer in the world is our brain, and we can make it work for us. 18

One person says, I am not rich because I have kids to support and another person says I must be rich because I have kids to support. One plays it safe, while the other learns to manage risks. There is a serious mistake in peoples thinking about their own homes: our homes are not our largest investment or greatest asset, but rather a liability (because we have pay for them). 19 For some people, job protection and benefits seem more important than the job itself. One person writes an impressive cv to find a good job. The other writes a business plan so to create jobs. People shape their lives through their own thoughts. 35 The first lesson Robert learned was as a child working for his Rich Dad for a small salary. Rich Dad intentionally gave him low salary, waiting for Robert to decide he does not want to work for a small pay. 37 Life teaches us not by lecturing, but by pushing us around. 38 If you do not learn, life will keep pushing you. Some people let life push them around. Others get angry and push back. But they may push back their boss, job, or family. They do not know that it is life that pushes them to begin with. Few people welcome life messages, learn from them, and move on. Understanding this concept can make you happy and wealthy. Not understanding this concept will see you blame your job, your low pay or your boss. 40 Most people want to change other, but not themselves. It is easier to change yourself 41 The poor work for money, the rich have money to work for them. True learning takes energy, passion, and desire. Most people play it safe with money, and feel secured, so passion does not direct them. Fear does. So they take a secured job, and a low pay cheque. 42 Fear keeps most people working at a job. The fear of not paying their bills, or of being fired. That is the price of learning a profession and then working for money. Most people become

slaves to money, then they get angry at their boss. Even if paid more, people tend to spend more so still they cannot pay the bills. 44 More money will not solve your problems. It is financial education that solves problems. The rich earn more than others, but pay less in taxes 45 Rich Dad sent Robert back to work, this time with not pay at all. This was a lesson not to work for money 54 Being rich, but not handling your fears and desires, means you turned out to be a high-paid slave. 59 The rich know that money is illusion, but billions of people do not know that. Money is made up of the illusion of confidence and ignorance. 60 Most people think that money is real, and that the company and government will look after them. Opportunities are right in front of us, but we tend not to see them when we are looking for money and security. As Robert now worked for free, he had no money to buy his favourite comic books. 61 Only then he noticed that the shopkeeper, where he worked, was tearing off the front page of some comic books. He always saw her doing that, but only now, as he was not paid (and still wanting to buy these comic books) that he had noticed that. She told him that she returns the front page of all books that are not sold to the distributor. Robert then asked the distributor if he can keep the books, and was given a permission to do so. Without a safe salary to buy the books, Robert now collected hundreds of them, far more than he could pay for had he a salary to buy them 62 Not getting a secured pay cheque, Robert and his friend Mike, had to use their imagination to identify an opportunity to make money, which led to an idea to open a library of these comic books, and charge other children who wanted to read these books. Opening their own library of

comic books gave them the experience of not being dependant on an employer. This small business generated money for them even when they were not physically there. Money worked for them. 65 A successful business is like a tree. You water it for years until its roots gone down deep enough for it not to be needed you any more. Then the tree provides you with its shade. 67 Money does not solve problems; intelligence does. And it is intelligence that produces money. Money with no financial intelligence is soon gone. Its not how much money you make, but how much you keep. 69 The rich acquire assets. The poor acquire liabilities and think that they are assets. 72 The cash flow pattern of an asset:

Cash flow pattern of an asset. 73 The cash flow of a liability:

The cash flow pattern of a liability. Asset puts money in the pocket, liability takes money out. 74 People struggle financially because they cannot read numbers or words that the rich can. In financial reports, reading the numbers is looking for the plot, the story of where the cash flows. A cash flow pattern of poor person:

Cash flow pattern of a poor person - Kiyosaki Robert. 75 A cash flow pattern of a middle-class person:

Cash flow pattern of a middle-class person - Kiyosaki Robert. Gil Dekel. 76 A cash flow pattern of a wealthy person:

Cash flow pattern of a wealthy person - Kiyosaki Robert. 78 Students leave school without financial skills, so millions of educated people pursue their profession successfully, but later struggle financially. What is missing from the education is not how to make money, but how to spend money wisely.

82 Working hard without self-knowledge, without asking ourselves what we do, and without understanding money, allows money to have control over us. Our inner wisdom is a genius inside of us, but we tend to ignore it. We just follow the crowd. We do what the rest do. We conform rather than question. 83 This fear of being different prevents us from opening up to new ways of solving problems. We can be true to our inner wisdom, rather than be true to our fears. 86 Owning your house is better than nothing, but a home is a liability as it takes money out of your pocket each month. And a bigger home takes more money. Many will disagree with this because a nice home is emotional thing, and emotions tend to lower our financial intelligence. Money has a way of making decisions emotional 88 If you want a bigger house then first buy assets that will generate the cash flow to pay for the house. 92 Concentrate on buying income-generating assets. 93 This is the cash flow of most of us:

Cash flow of most people - Kiyosaki Robert. Gil Dekel. 95 Wealth is measured by how much money your money makes. This indicates financial survivability. The cash flow from assets, compared with the cash flow from expenses. For example, expenses of 1000 per month, with assets cash flow of 1000 per month make you a wealthy person, because there is no dependence here on a salary, but on assets that fully cover and pay for your months expenses. Now, the goal will is to increase cash flow from assets so there is more money coming from assets than taken by expenses, and then to reinvest the money in new assets. The more money goes to assets, the more assets grow, and the more cash flow grows. 104-105 A new car loses nearly 25 percent the moment you buy it. A car is not an asset, even if the bankers consider it as an asset when you come to apply for a loan. Real estate assets are: - Businesses that do not require your presence. (You own them and they are managed and run by

other people. If you work there, it is not a business but a job). - Stocks. - Bonds. - Mutual funds. - Income-generating real estate. - Notes (IOUs). - Royalties from intellectual property, such as music, scripts, patents. - Things that produce income and have a ready market. Buy what you love. If you dont love it, you will not take care of it. 106 Once a pound goes into your assets do not let it go. The pound becomes your employee, working 24 hours a day, for generations long. The last things that the rich buy are luxuries. They first sort their cash flow, and only once it grows they buy the luxuries they want. The middle class, on the other hand, tend to buy luxuries first. 112 In the history of Britain and the USA there were no taxes, rather temporary pay levied to finance wars. In Britain, tax was levied to pay for the war against Napoleon 1799-1816. In 1874 England made the income tax a permanent levy. These taxes were initially levied against only the rich, and they were popular because the middle class and the poor were told that taxes are created to punish the rich. So the masses voted for the tax law, and it became legal. This resulted in taxes expanded to the middle class and the poor as governments got a taste of money, and their appetite grew. 113 Tax laws passed because the masses believed in a Robin Hood theory of taking from the rich and giving to the poor. But governments soon started to tax the middle class, not just the rich. 115 No matter how strong is the idea of taking from the rich, the rich always find ways to outsmart. When the rich got taxed, money flew to the government to create jobs and pensions. But it went back to the rich via their factories receiving government contracts. 116 When income-tax was passed, the income-tax paid by corporations was less than the individual income-tax rates, so corporations became popular. 117 Code 1031 in the USA allows a seller to delay paying taxes on real estate that is sold for a capital gain through an exchange for a more expensive real estate. As long as you keep trading up in value in real estate, you will not be taxed on the gain, until you liquidate.

121-123 Financial IQ requires four broad areas of expertise: Accounting, Investing, Understanding the Market, and Understanding the Law. A corporation provides tax advantages and protects people from law suits. Corporations Tax advantages: - Pay for expenses before paying taxes. Employees, on the other hand, earn and get taxes, and then live on what is left. A corporation earns, spends as much as it can, and is taxed on what is left. It is one of the biggest legal tax loopholes that the rich use. - A corporation can pay its owner for car payments, insurance, repairs, club membership, and partial expenses, which are spend using pre-tax money. Protection from lawsuits: - In our society everyone wants a piece from your action. The rich hide much of their wealth using vehicles such as corporation and trusts, which protect their assets from creditors. - When someone tries to sue a wealthy individual, they often have to face well-paid lawyers that work for the corporations. The rich that have a corporation earn money, spend it, and only then pay taxes. People who work for a corporation earn money, pay taxes, and then spend. 128 Fear suppresses the genius mind. Students who know the answer may lack the courage to act on the answer in the class room. In real life it is not the smart that gets ahead but the bold.

Lessons from Rich Dad, Poor Dad (summary)

By Nick Kraakman | 27 January 2013

Many people work very hard, but they never seem to earn enough. In Rich Dad, Poor Dad, Robert Kiyosaki explains how to escape this "rat race" and achieve financial independence. Everybody should go to school, get high grades and then get a good job, right? Wrong! Well, at least if financial independence is what you are aiming at. Our education system is the number one cause of why so many people struggle financially. Schools teach people how to work for money, but they do not teach them how money can work for them. This lack of financial skills taught in school means that even highly educated people generally do not know how to handle money. The result is that the majority of people get trapped in work to pay their bills and are chasing paychecks all their life.

This is the sad conclusion Robert Kiyosaki draws in his bestselling book Rich Dad, Poor Dad. Luckily, he also offers a way out. A way to get ahead. The fundamental trouble with working for money is that a job is a short term solution to a long term problem. People believe that if they get that raise, or get a new job they will finally have enough. However, if you do not know how money works, you can never have enough. Money alone will not solve anything, it will even get most people into more debt. So what is the secret to financial independence? Close the doors.. "Know what an asset is, acquire them and become rich." That's it! Easy, huh? The trouble is that people are not properly taught how to spend their money. Many do not know the difference between an asset, something which puts money in your pocket, and a liability, something which takes money outof your pocket. Kiyosaki's main point is that the only way to become financially independent is to accumulate income generating assets which can pay for your expenses. However, many people rather buy a new car or an iPad (liabilities) instead of investing that money in stocks or real estate (assets). I recently posted an infographic which shows the difference in returns if you would have bought Apple stocks instead of one of their products. The fear of straying from the generally accepted life path plays a big role in the financial decision making process. However, if you do not want money to control you like it does most people, then you will have to do things differently from the crowd. Investing legend John Templeton seems to agree on this point. But you already own income generating assets, because you own a house. The best investment you can make, right? Not really. The book lists several reasons:
1. Most people work all their lives paying for a home they never own 2. Despite a tax deduction for interest on mortgage payments, all expenses are paid with after-tax dollars 3. Property taxes can suddenly be increased without notice 4. Houses do not always go up in value 5. Opportunity costs are tremendous, because when all your money is tied up in your house, there will be no money left to invest in income generating assets

WHY THE RICH GET RICHER

I have heard from many people around me that their expenses always seem to keep up with their income. They do not understand why they earn more than they used to but still have no money left at the end of the month. They struggle financially because when their income goes up, their expenses also go up. However, their assets do not increase, but their liabilities do! They work to make their boss rich, they work to pay government taxes, and they work for the bank to pay off their debts. Working harder means that you will have to hand over an even bigger share of your efforts to these three parties. The rich get richer because their assets generate more than enough income to cover their expenses, and part of the income is then reinvested into new assets, therefore increasing the generated income even further. On the stock market, net income which is reinvested is called retained earnings. Reinvesting income into new assets triggers the power of

compounded interest, to which Einstein once famously referred as the "eighth wonder of the world". We have been talking about income generating assets, but what falls into that category? Here is a list to give you some ideas:
1. 2. 3. 4. 5. 6. 7. Businesses that do not require your presence Stocks Bonds Mutual funds Income-generating real estate Royalties And really anything which appreciates in value over time

If you think investing is scary and just another word for gambling, then I advise you to read into the low-risk, high-return strategy used by the investment greats: value investing.

SUMMARY & KEY LESSONS

Now that you are aware of the fundamental problems of working for money, I will sum up a few of the key lessons from the book which can help you achieve a life where you are no longer dependent on your paycheck and social security.
1. For most people, their profession is their income. For rich people, their assets are their income. 2. If I want to buy something, I must first generate enough cash flow from my assets to cover these expenses. Buy luxuries last, not first. 3. Excess cash flow generated by my assets should be reinvested into other assets. 4. Do not simply aim for more income, aim for more assets. 5. Keep your expenses low and reduce your liabilities. 6. Create a corporation to protect your assets and reduce tax expenses. An employee earns, gets taxed, and then spends what is left. A corporation earns, spends everything it can, and then gets taxed on what is left. This is the biggest legal loophole that the rich use! 7. Know a little about a lot. Learn something about accounting, investing, markets, the law, sales, marketing, leadership, writing, speaking, and negotiating. An investment in knowledge pays the best interest. 8. Work to learn, don't work to earn. Find a job where you can learn one or more of the above mentioned skills. 9. Do not simply buy investments. First invest in learning about investing. 10. You will become what you study, so choose your study materials carefully. Find people who are the best in their field. Then study and emulate them. 11. Every rich person has lost money at some point, but many poor people have never lost a dime. Playing not to lose money means you will never make money. "Winning means being unafraid to lose." 12. Failure inspires winners and defeats losers. When something does not work out the way you planned, let it inspire you to try a different approach. Learn and move on.

13. Be in control over your emotions. Do not let fear or opinions of the general public dictate your actions. When stock prices decline, people run away. However, when the local supermarket has a sale, people buy as much as they can. 14. Most sellers ask too much. It is rare that the asking price is lower than something is worth. 15. Surround yourself with people who are smarter than you, and pay them well! 16. Saying "I can't afford it" shuts down your brain. Asking "How can I afford it?" opens up your brain and triggers your financial genius to come up with a creative solution. 17. Pay yourself first. Each month, first invest a certain amount of money into income generating assets before you pay your bills. You come up short? Use this pressure to pay to inspire you to come up with innovative ways to get enough money to pay the bills before the bill collector comes knocking at your door. This is a difficult, but very important principle. However, it does not mean you should be irresponsible. Always pay your bills. Just pay yourself first, not last. If you pay yourself last, you would feel no pressure, but you would probably not come up with new sources of income either. 18. Have a clear purpose in mind. Why do you want to earn more passive income? For me, because I do not want to work all my life. I want to have control over how I decide to spend my time. Also, I want to support my parents financially, because they have been working hard all their life and they deserve an amazing retirement. Write down yours, because it will keep you motivated. 19. Listening is more important than talking. Do not constantly argue and think with your mouth, but instead ask questions and absorb new ideas. 20. On the market: do not follow the crowd, and do not try to time the market. Profits are made when you buy, not when you sell.

CONCLUSION
Not everyone seems pleased with the rather blunt way Robert Kiyosaki explains these money making principles in his book, and I partially agree. However, there is much knowledge to be gained if you are able to look past that layer. If you found these lessons useful, please share this article with people that you care about, because I truly believe that applying these principles consistently can lead to tremendous results! Also, be sure to check out my YouTube video here which explains how money works in a more visual way. "Wealth is a person's ability to survive so many number of days forward... or if I stopped working today, how long could I survive?"
http://www.valuespreadsheet.com/value-investing-blog/rich-dad-poor-dad-summary-robert-kiyosaki

Rich Dad, Poor Dad: Three Lessons

By Trent April 3, 2007 1

Well, it had to happen sometime. After stirring up a hornets nest the last time I discussed Robert Kiyosaki, it somewhat became inevitable that I would review his very well known personal finance book, Rich Dad, Poor Dad. This book has been inspirational to many people, but the book seems to have produced as many critics as champions. Whats really inside those covers? Lets dig in. The title Rich Dad, Poor Dad refers to the two main male influences that Robert had as a child. His own father, the figurative poor dad, worked at a steady job for a living, while the rich dad (the father of a friend) ran a multitude of businesses. Most of this book is told from the perspective of Robert learning from his rich dad about how to make money and seeing how his poor dad made huge money mistakes. The first two thirds of the book covers six lessons taught to Robert by his rich dad. Today and tomorrow, Ill cover these six lessons, then on Thursday Ill examine the remainder of the book. Lesson 1: The Rich Dont Work For Money This lesson has an ambiguous title that gives two separate meanings based on how you read it actually, based on where you put the emphasis. If you read the title as the rich dont work for money, thats the wrong one. The rich in fact do work, and they work quite hard. The way the title should be read is that the rich dont work for money. They work to learn things, and the things they learn can easily be applied to make money over and over again. I agree with this

sentiment entirely good ideas are always more valuable than good labor, because you can keep mining good ideas, while good labor is spent the second you do the work. Another part of this lesson I liked is that the rich dad is actually quite frugal. Although he has a lot of money in the bank, he drives a cheap car and doesnt live in a mansion. Too many people equate rich with material things, so I enjoy it when it is shown that being rich often has very little connection to material possessions. Being rich means never having to worry about paying your bills it doesnt mean driving a Ferrari (well, at least not until you can pay cash for it and not break a sweat). Without a doubt, this was my favorite part of the entire book, even with the short, out of place rant about the gold standard (actually a misnomer, because the only way the book makes any sense in terms of time is if the rich dad is actually talking about the Bretton Woods system and not the true gold standard) and how the United States was doomed if they abandoned it. Lesson 2: Why Teach Financial Literacy? This is the section of the book that causes a lot of controversy when discussed. In a nutshell, this chapter redefines the term asset. For most, an asset is something that has value. For example, your home is an asset because it is something you own that has value. Well, this section of the book redefines the word. To Robert Kiyosaki, an asset is something that generates income, while a liability is anything that has costs. In other words, by this definition, your primary residence is not an asset but a liability. It may have cash value, but it doesnt generate income. Instead, assets are forms of passive income that you control, like a rental property or intellectual property. So whats the overall lesson here? Basically, you become rich by accumulating assets, assets as defined by this book. This basically means that, in my case for example, my truck is not an asset but The Simple Dollar is an asset (it generates revenue on its own I write because I enjoy it). Wealth comes from having enough assets that generate enough income so that all of your expenses are covered and there is enough left over to invest in more assets. Lesson 3: Mind Your Own Business The point of this chapter is that a financially healthy individual should be spending their spare time not spending their paychecks, but investing as much of it as possible in assets (as defined by this book). This is another lesson I strongly agree with: pay off your debts and start investing as soon as you can into things that can generate revenue. This lesson was short and sweet. However, tomorrow Im going to look at some lessons that are a bit more difficult to swallow.
http://www.thesimpledollar.com/2007/04/03/rich-dad-poor-dad-three-lessons/