Brief summary:

Robert Kiyosaki, the author of this book, had two fathers. A well-educated father who had a Ph.D. yet died broke; he called him “poor dad.” The other one was not that well-educated but was rich; he called him “rich dad.” Robert's dream of becoming rich started when he was young. His “poor dad” wanted him to study more and secure a job at a large company. “Rich dad” was his friend Mike's father; he wanted Robert to take risks and learn that not all lessons were taught in school. He wanted Robert to know that some lessons had to be taught by going through hardships. These kinds of lessons can't be acquired by simply going to school and getting good grades. It's important to have a good education, but life is not just about that.

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Lesson 1: The rich don't work for money; money works for them.

There's an old story about a man who owned a donkey. Whenever he wanted the donkey to work harder, he would put a carrot in front of the donkey's eyes, so the donkey was motivated by the carrot. It kept walking, hoping to reach that carrot one day. This worked well for the man but was not ideal for the donkey. The carrot in the story is like money. People keep working, hoping that someday they will become rich. Money is an illusion; you'll never reach it if you're working only to take the carrot. Instead, try to make money work for you.

When you first start the journey of making money, don't work to gain money. Fear and desire are consistently controlling how we act.We have a fear of not having enough money; this makes us work harder each day. Then we gain a desire as we imagine all the beautiful things money can do and buy. Our fears and desires put us in a never-ending cycle of wanting more. We work harder to make more money, and as a result, we spend more. “Rich dad” called this the Rat Race. Instead of falling into that pattern, avoid the trap of fear and desire. That's how most people who want to be rich fail; you have to make money work for you.

When you get a job, don't go into work thinking you'll simply take your paycheck at the end of the month. You'll barely pay your bills and then repeat the cycle all over again. Even working harder at a second job is still only working for money. If you keep doing this, you're never going to be rich.Confront yourself, are you just looking for security at a safe job? Are you working to make more money because you think that this is going to make you rich or satisfy you? If the answer is yes, unfortunately, you're never going to make it. You'll die broke. If your answer is no, then you've taken the first step. Never let your fear of not having enough money or the desire to make more money encourage irrational behaviours.

We have business schools that do not teach us how to lead a business or start one. Instead, they teach us how to be a bean-counter, how to fire people, and give orders. They hardly ever teach you how to be a leader.Every day when you wake up, ask yourself if you are doing all you can. If you haven't reached your fullest potential, don't go day by day thinking about money or how to work more to get a better raise. Don't hold thoughts in your head like, “My boss doesn't pay me enough, I deserve a raise, I deserve to earn more money.” When you stop blaming other people for your problems and accept that the problem is your way of thinking, then you'll be able to correct to more positive thoughts. That was the first lesson that “rich dad” taught Robert.

When Robert and his friend Mike were teenagers, “rich dad” made them work at his convenience store for free. They kept working, not thinking about how much money they weren't making. During their working hours, they were able to free their minds and create new ideas to make money work for them. At the store, they watched the store clerk cut the front pages of comic books in two; she would keep one half and throw the rest of the comic away. At the end of the day, the distributor would come and take the top half of the books and give new comics to the store.

The boys waited for the distributor to arrive and asked him if they could keep the old comic books. He said yes, but they had to agree not to sell them. The boys agreed and started a business. They charged kids to read comic books. Ten cents per book for two hours, and then it would be returned. Technically they were not selling them. They worked their business out of their garage and paid Mike's sister 1 dollar a week to run it. They made about 9.50 dollars a week. They had finally learned how to make money work for them.

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Lesson 2: Why teach financial literacy?

In 1923, there was a meeting at the Edgewater Beach hotel in Chicago. A lot of world leaders attended that meeting along with a group of the richest businessmen in the world. Among them was Charles Schwab, the head of a large steel company, and other rich businessmen. Twenty-five years later after that meeting, all these men either died broke, committed suicide, or went insane.

People care so much about making money that they forget to receive an education that teaches them how to keep it. It's never about how much money you make as much as it's about how much money you keep. A lot of people won millions of dollars in the lottery. After a few years, they were back to exactly where they started, if not worse.A lot of people ask about how they should get started; the answer is pretty disappointing. The answer is to be financially literate. When you want to build the Empire State Building, you'd have to dig a deep hole and pour a strong foundation. When you want to build a small house, pouring a six-inch slab of concrete is all you have to do. Unfortunately, most people build an Empire State Building on a six-inch slab of concrete, and it crumbles.

“Poor dad” wanted Robert to read books and study, while “rich dad” wanted him to be financially literate. The school system teaches people how to build homes with no foundation; while reading books and studying is still important, it's not enough.

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Rule no.1: Learn the difference between liabilities and assets, and buy assets.

This may sound simple, but it's the only rule that you need to become rich. The poor and the middle class buy liabilities that they believe are assets, while the rich buy real assets.”Rich dad” believed in a principle called K.I.S.S., Keep It Simple, Stupid. He kept it simple for our author and his friend, Mike; that's what made them build a strong foundation. The simplicity of the teaching, there's a reason why everyone is not rich, is simple. The simplicity of it is why no one thinks about it. People think they know the difference between “literacy” and “financial literacy.” Most people only understand being literate.”Rich dad” used to explain the difference between assets and liabilities with simple charts.

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The cashflow pattern of assets is as follows:

Income statement

The income statement is sometimes known as the “profit and loss statement.” Here, Income means money that comes in your pocket, and expense means money that goes out of your pocket.

Balance sheet

The balance sheet lists and compares someone's assets against their liabilities.

Assets are things that put money into your pockets without even having to work for it. For example, if you buy a house and rent it to others, that rent could pay for the house loan and still put money in your pocket. At the same time, liabilities are things that take money away from you. For example, buying a house and living in it without renting it to anyone. You're only spending money without gaining anything. To be rich, buy assets; to be poor, buy liabilities.The rich have more money because they understand what assets are.  The poor have less money because there is something in that principle that they don't quite understand. That's why it's so important to be financially literate.

When looking at the income of families who work really hard, their cash flow history usually shows that they work hard and earn good money. When it is spent, however, the money is spent on several liabilities, and there is nothing left over to be put into gaining assets.Another chart, “rich dad,” showed the boys showed them the cash flow of the middle class.

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Income statement

Balance sheet

In this,  the middle class has nothing in their asset's column, and the only thing that increases their income is their salary. However, when we look at their expense category, the middle class loses most of their money to rent or a mortgage, taxes, and everyday expenses.That's how the middle-class spend their money, and if they continue to do so, they'll forever stay middle-class. They may even have less money in the future because they're spending their money on liabilities, such as a mortgage, car loans, house loans, and credit card fees.

Poor people, on the other hand, do not buy liabilities, but they don't buy assets either; they only earn money from their salary, and they spend it on daily living expenses. For example, a man in the poor class makes a thousand dollars; he pays 300 dollars for his small house rent, 200 dollars for transportation, 200 dollars as taxes, and 200 dollars for food and clothes. After paying for all of this, they are left with nothing. Sometimes they may have to borrow money, which puts them in more dept.

The rich use their assets to generate money without having to work. For example, the rich buy a house with a loan and then rent it to other people. On a small scale, they pay 1 dollar for the loan instalment per month, and then they have someone in the house that pays two dollars for rent. This way, when they get the money from the rent, they can pay the 1 dollar for the loan instalment and still make a profit. They can make this money without having to work a 40-hour week.The real difference between “poor dad” and “rich dad” was their mentality. How they decided to handle their money was different and set them on different financial paths.

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