I just recently finished reading a book that’s been recommended to me quite a few times over the years, titled Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money – That The Poor And Middle Class Do Not! by Robert Kiyosaki, and thought I’d share some of the overarching lessons from the book in a post.
Disclaimer: Rich Dad, Poor Dad is a somewhat controversial book in regards to the methodologies it prescribes and its subversive nature, in particular with the section on “mitigating” taxes. As with anything, I recommend taking the good and leaving the bad. 🙂
Overall Premise & Plot
Unlike most self-help books, there’s actually a bit of a narrative and backstory in Rich Dad, Poor Dad, which makes the book more engaging overall and slightly less episodic than others within the genre. Essentially, the story is about a man who, as a boy, had a father that was very well educated, and subsequently well paid, but still suffered financially due to his poor management of money or “financial illiteracy.”
On the other hand, the boy’s best friend’s father, whom he refers to as “Rich Dad,” owns various businesses and does exceptionally well for himself financially, despite not even having a high school diploma. The majority of the book consists of the lessons of money and building wealth that the boy learns from his “Rich Dad,” who takes the boy under his wing and educates him through his eccentric, yet effective, methods.
The overall premise of the book is to challenge the normative dogma that has thrived for centuries around the world: “Get a good education, work for a large corporation with great compensation and benefits and then retire in your mid-sixties.”
It’s important to note that while Rich Dad, Poor Dad is indubitably subversive, it (rightfully) does not challenge or condemn those that want to attain a higher education and/or work at large corporations for financial security. In fact, to some degree, it encourages it. The premise of the book is that this is simply not enough anymore and “financial literacy” is more important than ever.
So, without further ado, here are some of the most important lessons from Rich Dad, Poor Dad. I’ve also included excerpts from the book for each lesson so you may easily reference it, if you wish.
1. People really do shape their life with their thoughts
For example, my poor dad always said, “I’ll never be rich.” And that prophesy became reality. My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.” Even when he was flat broke after a major financial setback, he continued to refer to himself as rich. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary, and poor is eternal.” (page 16)
Ultimately, what we believe is what we become.
2. Know the difference between an asset and a liability, and buy assets
Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets. (page 42)
I realize this lesson sounds rudimentary but it’s incredibly important and often overlooked. Most of us think we know the difference between an asset and a liability but we make choices that indicate otherwise, especially when it comes to justifying extravagant spending.
3. Money seldom solves someone’s money problems
This is one of my favorite lessons and has some of the most profound and prevalent examples. The most extreme example is of lottery winners who win millions of dollars, only to have nothing left of it a year or two later. A more normative – and possibly relatable – example is of individuals who regurgitate the same doctrine that a raise at work would help alleviate their financial difficulties, only to finally get that raise and subsequently fall into deeper financial trouble.
The philosophy that a pay raise means you can buy a larger home or spend more is the foundation of today’s debt-ridden society. (page 77)
Buying a luxury on credit often causes a person to sooner later actually resent that luxury because the debt on the luxury becomes a financial burden. (page 91)
The idea is to live well below your means and manage your finances properly.
Overall, I think Rich Dad, Poor Dad is absolutely worth the read as it’s filled with invaluable gems of knowledge for everyone, not just aspiring or current entrepreneurs, and it’s one of those books that you can always refer back to for guidance and insight.
Until Next Time,