Rich Dad Vs Poor Dad Book Summary

Introduction
Rich Dad Poor DadRobert Kiyosaki, author of Rich Dad Poor Dad, had two main influential
fathers in his life.
Poor Dad was Kiyosaki’s biological father, a man who was highly intelligent and very well
educated. Poor Dad believed in studying hard and getting good grades, then finding a well-
paying job. Yet, despite these seemingly positive attributes, Poor Dad didn’t do well financially.
Rich Dad was the father of Kiyosaki’s best friend. He had a similar work ethic to Kiyosaki’s real
dad, but with a twist. Rich Dad believed in financial education, learning how money works, and
understanding how to make money work for you. Although he was an eighth-grade dropout,
Rich Dad eventually became a millionaire by putting the power of money to work for him.
The book is written from Kiyosaki’s perspective of how Rich Dad went about making money and
the mistakes that Poor Dad made. The first six chapters of Rich Dad Poor Dad make up about
two-thirds of the book and discuss the six lessons that Kiyosaki learned from his Rich Dad.
Chapter 1: The Rich Don’t Work for Money

Oftentimes people misunderstand the title of this chapter, and mistakenly believe that it means
the rich don’t work. In fact, the complete opposite is true.
Instead of reading the chapter title as “The Rich Don’t Work for Money”, what Kiyosaki means to
say is that “The Rich Don’t Work for Money.” Note that by putting the emphasis on the word
“money” this section takes on an entirely different meaning.
The truth is that the majority of rich people do work very hard, but they go about it differently
than most people do. Rich people – and people who want to become rich – work and learn
every day how to put money to work for them. As Rich Dad says, “The poor and middle class
work for money. The rich have money work for them.”
Kiyosaki also notes that having a regular job is just a short-term solution to the long-term
problem (or challenge) of creating wealth and financial freedom:
“It’s fear that keeps most people working at a job: the fear of not paying their bills, the fear of
being fired, the fear of not having enough money, and the fear of starting over. That’s the price
of studying to learn a profession or trade, and then working for money. Most people become a
slave to money – and then get angry at their boss.”
Chapter 2: Why Teach Financial Literacy?

The second chapter of Rich Dad Poor Dad explains the difference between an asset and a
liability. Chapter 2 drives home the point that it’s not about how much money you make, but
about how much money you keep.
An asset is something that has value, that produces income or appreciates, and has a market
where the asset can easily be bought and sold:
Assets produce income

Assets appreciate
Assets do both
Conversely, liabilities take money out of your pocket because of the costs associated with them.
When Rich Dad Poor Dad was first published back in 1997, Kiyosaki created a lot of
controversy with this statement.
That’s because by definition, a personal residence isn’t an asset unless it appreciates enough to
offset the costs of ownership. On the other hand, rental property is an asset because it can
generate enough passive income to exceed the expenses of operating and financing the real
estate.
As Kiyosaki writes in Chapter 2 of Rich Dad Poor Dad, “Want to grow rich? Concentrate your
efforts on buying income-producing assets – when you truly understand what an asset is. Keep
liabilities and expenses low. You’ll deepen your asset column.”
Chapter 3: Mind Your Own Business

There are two key messages in this chapter.
First, pay off your debts and start investing in income-producing assets as soon as possible.
Next, stay financially healthy by spending your time (instead of your paycheck) and investing as
much of your money as possible in assets.
Kiyosaki notes in Chapter 3 of Rich Dad Poor Dad that most people confuse their profession
with their business. In other words, they spend their entire lives working in somebody else’s
business and making other people rich.
One of my favorite quotes from this section is:
“The primary reason the majority of the poor and middle class are fiscally conservative is that
they have no financial foundation. They have to cling to their jobs and play it safe. They can’t
afford to take risks.”
Chapter 4: The History of Taxes and the Power of Corporations

When reading this chapter, it’s important to keep in mind that Kiyosaki wrote Rich Dad Poor Dad
as a motivational book, not to provide expert financial or tax advice.
For example, Kiyosaki writes about the time he bought a Porsche and treated it as a business
expense, using before-tax dollars. Buying a high-end luxury car when a much less expensive
make and model would do could put an investor on the fast track to an IRS audit.
But putting the Porsche aside, the points made in this chapter discuss how to play the
investment game smart. The rich understand the power of company structures and the tax code
and use every legal means they can to minimize their tax burden.
Compare how business owners and investors with corporations such as C Corps, S Corps, or
LLCs pay taxes to how most people pay tax:
Business owners with a corporate structure:
Earn
Spend
Pay taxes
Employees who work for corporations:
Earn
Pay taxes
Spend
Notice that employees who work for somebody else spend their money post-tax, while business
owners earn and spend before paying tax.
Chapter 4 of the book also covers the four main components of what Kiyosaki calls “Financial
IQ”: Accounting, Investment Strategy, Market Law, and Law.
As Rich Dad Poor Dad reminds us, understanding the legal and tax advantages significantly
contribute to building long-term wealth:
“For instance, a corporation can pay expenses before paying taxes, whereas an employee gets
taxed first and must try to pay expenses on what is left. . . Corporations also offer legal
protection from lawsuits. When someone sues a wealthy individual, they are often met with
layers of legal protection and often find that the wealthy person actually owns nothing [in their
own name]. They control everything, but [personally] own nothing.”
Chapter 5: The Rich Invent Money

Inventing money means finding opportunities or deals that other people don’t have the skill,
knowledge, resources, or contacts for.
In Chapter 5, Rich Dad Poor Dad explains there are two types of investors:
Investment packages are bought by people who entrust their money to a developer or fund
manager. This is the way that most people invest, such as buying shares of an ETF or putting
money into a real estate crowdfunding venture.
Professional investors look after their own investments, research the market to find deals that
make sense, then hire professionals to manage the daily oversight. Professional investors have
three things in common:
Identify opportunities that other people have not found
Raise funds for investment
Work with other intelligent people
Here’s one of my favorite closing thoughts from this chapter:
“Some people argue that there aren’t real estate bargains where they are, but there are prime
opportunities everywhere that are overlooked. Most people aren’t trained financially to recognize
the opportunities in front of them.”
Chapter 6: Work to Learn – Don’t Work for Money

Poor Dad was intelligent and well educated and worked for money because job security meant
everything to him. Rich Dad became a millionaire by working to learn.
As Kiyosaki writes:
“I recommend to young people to seek work for what they will learn, more than what they will
earn. Look down the road at what skills they want to acquire before choosing a specific
profession and before getting trapped in the Rat Race.”
In fact, that’s exactly what Kiyosaki did. He joined the Marines after graduating from college and
learned the essential business skills of leading and managing people. After serving his country,
Kiyosaki joined Xerox, overcame his fear of rejection to become one of the top five salespeople
in the company, then left the corporate world to form his own business.
Chapter 6 of Rich Dad Poor Dad then discusses the synergy of management skills needed for
success in business:
Cash flow management

Systems management
People management

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Introduction

Chapter 1: The Rich Don’t Work for Money

Chapter 2: Why Teach Financial Literacy?

Assets produce income

Chapter 3: Mind Your Own Business

One of my favorite quotes from this section is:

Chapter 4: The History of Taxes and the Power of Corporations

Business owners with a corporate structure:

Chapter 5: The Rich Invent Money

Chapter 6: Work to Learn – Don’t Work for Money

Cash flow management

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