Book Review: Rich Dad Poor Dad

This is an overview of the book Rich Dad Poor Dad by Robert Kiyosaki

This is the first book in the trilogy of Rich Dad books.

Kiyosaki's bio: Mr. Kiyosaki is a fourth generation Japanese American who was born in Hilo, Hawaii in 1947. He graduated for from the US Merchant Marine Academy and served as a helicopter pilot in the Vietnam war. Robert is an investor and educator and founder of the Rich Dad company whose stated mission is to, “Elevate the financial well-being of humanity.”

Key point: “The idea that it takes money to make money is the thinking of financially unsophisticated people. Money is only an idea.”

This is a book about personal finance. The book says this about itself, “Rich Dad Poor Dad is a true story on the lessons about money that Robert Kiyosaki learned from his two 'Dads.' One Dad, a PhD and Superintendent of Education, never had enough money at the end of the month and died broke. His other Dad dropped out of school at age 13 and went on to become one of the wealthiest men in Hawaii.”

The first dad, who had the PhD, and worked for the government, was Robert’s biological father. He worked all the time, and yet, was always stressed about money. The other dad, who dropped out of school at 13, was Robert’s best friend’s father. This second dad was able to use the extra time he had, from being rich, to teach the boys as they were growing up.

So the story is a tale of contrasting views towards money. For some, money has a sort of evil connotation. Where the explicit pursuit of money is an unholy act. These are people that might be taking the Bible a little too literally. In Matthew it is written that, "It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God." Some people even believe that money is the root of all evil. 

Other people take a more receptive approach to money. These people take the perspective that money is something they have always used, and it is something they will always use. So they figure they might as well learn about it.  Kiyosaki was able to study both sides of the equation and has decided to go with the latter. That is to say, Robert listened to his rich dad. This book details the beginning of Robert's financial education.

As a youngster Robert was taught six lessons about money. And these six lessons now form the core of his book. I will briefly discuss each one. By the way, the lessons Kiyosaki teaches are the lessons of his Rich Dad so I use the two names interchangeably.

Lesson One – The Rich Don't Work for Money

Kiyosaki says, “The poor and the middle class work for money. The rich have money work for them.” Robert says that most people are stuck in what he calls the Rat Race. The reason for this is most people are hamstrung by their lack of control over their emotions. Rich Dad would say, “The pattern of get up, go to work, pay bills, get up, go to work, pay bills ... Their lives are then run forever by two emotions, fear and greed. Offer them more money, and they continue the cycle by also increasing their spending. This is what I call the Rat Race.”

Lesson Two – Why Teach Finanical Literacy?

“Intelligence solves problems and produces money. Money without financial intelligence is money soon gone ... Rule One. You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. It is Rule No. 1. It is the only rule.” The definitions are really quite simple. An asset is anything that puts money into your pocket. A liability is anything that takes money out of your pocket.

Lesson Three – Mind Your Own Business

Rich Dad taught Robert that if he wanted to become rich he would need to own (mind) his own business. “For adults, keep your expenses low, reduce your liabilities and diligently build a base of solid assets.” This doesn't mean you can't have nice stuff. It simply points out, “An important distinction is that rich people buy luxuries last, while the poor and middle class tend to buy luxuries first,” on credit. Rich Dad would say, “Let your assets buy your luxuries.”

Lesson Four – The History of Taxes and the Power of Corporation

“The reality is that the rich are not taxed. It's the middle class who pays for the poor, especially the educated upper-income middle class … Employees earn and get taxed and then try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left. It's one of the biggest legal tax loopholes that the rich use.”

Lesson Five – The Rich Invent Money

There are many ways the rich invent money. One example would be to purchase raw land, get it rezoned and sell it to real estate developers looking to build homes or a shopping mall. Another way is trading stocks, in particular, buying stocks of a pre-IPO company. Unfortunately, many of the best stocks aren't available to the average investor. In an attempt to curtail junk bond salesmen the SEC created a classification system for securities. The result was that it now requires too much work for most pre-IPO companies to seek investments from average investors. It usually makes more sense to go to a syndicate of “sophisticated” investors. (note: the Jobs Act of 2012 has changed this)

Lesson Six – Work to Learn – Don't Work for Money

Rich Dad would often say that it isn't money that makes you rich, it's business skills. And, the single most important business skill is selling and communicating. It is for this reason that Kiyosaki often recommends a network marketing company, also known as multi-level marketing. MLM's focus on training and developing their people. Specifically in the areas of selling, communicating, and leadership. So, first wealthy people learn and develop the skills. Then they get the money. The poor want to be paid while they're being trained.

Kiyosaki sees five main obstacles, that people must overcome, if they wish to be rich. They are: fear, cynicism, laziness, bad habits, and arrogance.

To get us moving, Robert concludes by saying, “I offer you the following ten steps as a process to develop your God-given powers.”

1. I need a reason greater than reality – The power of spirit.

2. I choose daily – The power of choice.

3. Choose friends carefully – The power of association.

4. Master a formula and then learn a new one – The power of learning quickly.

5. Pay yourself first – The power of self-discipline.

6. Pay your brokers well – The power of good advice.

7. Be an “Indian giver.” - The power of getting something for nothing.

8. Assets buy luxuries – The power of focus.

9. The need for heroes – The power myth. Emulate your heroes.

10. Teach and you shall receive – The power of giving.

I'll end back where I began. Many people believe it takes money to make money. Kiyosaki thinks this is foolish. “The idea that it takes money to make money is the thinking of financially unsophisticated people. Money is only an idea.” To make more money takes better ideas. Kiyosaki would say we derive betters ideas from being more educated. Specifically in the area of financial intelligent.

How can you use this information right now?

Mind your own business. If you don't already own your own business you need to. ASAP! According to Robert Kiyosaki and Donald Trump, the best option for most people, is to join a network marketing company. This way you can keep the job you have while learning Rich Dad's lesson on the side. If you ask nicely, I might let you join me. :)