Book Review: Rich Dad Poor Dad By Robert Kiyosaki

Rich Dad Poor Dad is one of the best personal finance books I've ever read, which makes sense as to why it has become the number one selling finance book of all time. The main premise of the story is that the author, Robert Kiyosaki, as two fathers, one biological(poor), and his friends father, who he considers his rich dad.

Both fathers taught Robert a lot, but all different values in regards to personal finance. His father is a highly educated man, who made by many people's standards a large amount of money, yet he never felt successful, and he never felt financially wealthy. His biological dad would say things like "money isn't important to me" or "money is the root of all evil", while his rich dad would say just the opposite, that the lack of money is actually the root of all evil.

Robert's poor dad stressed the values that many parents instill in their children today, study hard , go to college, so when you graduate you can get a safe, solid job with a good company with good benefits. Do not indulge in things you cannot afford, and save up for a healthy retirement. This is what was described in the book as the "rat race" as you are constantly searching for a higher paying job with more benefits, but it always offset with increasing in spending.

One of the most important lessons the rich dad teaches Robert is that he should never say "I cannot afford it", as that makes your brain stop working and forces you to give up. Instead, one should ask "How can I afford it?". To implement this lesson he made Robert work for extremely low wages, so that he would learn that in order to get ahead he must work for himself, and to teach him to understand that he must find his own ways of making more money.

Kiyosaki states that there are six main lessons that he learned over the years from his rich dad, and goes on to explain these lessons.

They are:
1.) The Rich Don't Work for Money
2.)The importance of financial literacy
3.)Minding your own business
4.)Taxes and corporations
5.)The rich invent money
6.)The need to work to learn and not to work for money

Here is a summary of these 6 lessons, and the various chapters of "Rich Dad Poor Dad" by Robert Kiyosaki.

Initially Robert and his friend Mike start their own business, attempting to start making money. Shortly after, Robert's father tells them that their spirit is right, but they were literally attempting to make money, and find out that what they're doing is considered counterfeiting, and illegal. Robert's father suggests that if they're really interested in making money, they should talk to Mike's father, as he has many businesses. Mike's father agrees to teach them, but first says that they must learn by working, and not in a classroom style format.
The first lesson is putting Mike and Robert to work, 3 hours every Saturday for 10 cents an hour. Eventually after a few weeks they become upset, and demand a raise. Mike's father offers then continually increasing raises, or the opportunity to learn the lesson. Ultimately they decide to learn the lesson, turning down wages more than many adults were making at the time. The eventual lesson was to get out of the "rat race" , and instead of spending your entire life working for a small amount of money and making someone else a lot of money,you should have other people work hard to put money in your pocket. This is the most important lesson of the book in my opinion.

In the chapter, The Rich Don't work for money Robert describes how many people are too caught up in their life search for security and playing it safe, that they often miss great opportunities right in front of them, while the rich look for these opportunities and take advantage of them. He also discusses how not to let emotions influence financial decisions.

The book continues with showing what happens to Robert and Mike later on in life. Mike has successfully taken over his fathers businesses, and has taken them to new heights, while Robert has retired at the young age of just 47. The lesson from this chapter is that you need to maintain financially literary in order to maintain your wealth. Many professional athletes, as well as many other rich people end up broke due to their lack of understanding on how they became rich, and how to maintain and grow their wealth. The main objective from this chapter is know the difference between liabilities and assets, and focus on purchasing income producing assets. One of my favorite quotes from this chapter is, "Intelligence solves problems and produces money. Money without financial intelligence is money soon gone."
Robert goes on to explain that the reason poor people remain poor, is because they spend all their money foolishly, and on liabilities, while developing and purchasing zero assets. This is the exact opposite of the strategy rich people take, as they spend most of their money on assets,and limit money spent on liabilities. Sometimes it is not as so important how much you make, but how much you keep instead. Many people who find a job that pays more, or decide to take a second job or work overtime, end up just spending that extra money they worked for foolishly, and never end up ahead.

With the lesson, "mind your own business" Robert used McDonalds as an example. McDonalds may not be the best hamburger you've ever tasted, but where they really excel is real estate. McDonalds owns some of the most valuable locations for commercial real estate, all over the world. For someone to "mind their own business", they must ignore what's their employers business, and focus on ways to become their own boss and nurture their own business.
Robert then continues his discussion on building assets, which include real estate, stocks, bonds, mutual funds, investment properties and more. In order to get started, Robert recommends small cap stocks, as well as starting small with real estate, and using your profits to move up to larger real estate projects.

In regards to taxes, Robert discusses some very interesting topics. To be brief, Robert discusses how initially it was the poor and the middle class who decided they wanted to tax the rich, in order to receive a portion of their money via the government. As a result, the rich were in reality too smart to pay these high taxes, and found tax loopholes around them, resulting in the middle class paying the majority of the tax burden. The very people who voted in these taxes, ended up being the least beneficial.
Robert discusses how individuals can make money, pay taxes, and then live on what's leftover, while corporations can earn money, spend everything it can, and then pay taxes on what's left over after expenses. The working class people, and middle class workers, work from Jan to mid May just to give all those earnings to the government.
Robert recommends learning as much as you can to develop your financial IQ in topics such as accounting, investing, markets, and business law.

Later on, Robert discusses the idea of self doubt, and how psychology plays a role in the success of a person. He states that every person is born with a certain amount of talent, but often fails to recognize or utilize this talent. Many people instead opt for the safe, risk free life,and avoid any opportunities that may come their way. Many people sit around waiting for an opportunity to happen, rather than going out to find good opportunities. Robert also discusses how you should always hire people more intelligent than yourself, and surround yourself with the best people possible.

In the next chapter, Robert discusses how one should work to learn, not work for the money. He discusses how important sales, communication,and people skills are in all aspects of your life, and just because you have a PHD doesn't mean that you shouldn't have good sales or communication skills.

Robert then discusses the five personality traits that hinder a person's success. These are:
1.)Fear
2.)Cynicism
3.)Laziness
4.)Bad Habits
5.)Arrogance

Robert recommends avoiding negative pessimistic people, as they can only bring you down. For example, he often hears people say they want to be rich, but when he suggests money can be made in real estate their reaction is "I don't want to fix toilets". This shows that the average pessimistic person shows that they are more concerned about fixing toilets than they are about the great roads and opportunities that are available in real estate. Robert recommends becoming friends with people who enjoy talking about money, and who are positive people, as you never know what you may learn or what opportunity may arise.

Finally, Robert recommends if change is needed, that people quit what they're doing and explore a new path. It's important to learn as much as possible, and speak with people who have been where you'd like to go. He recommends reading, talking, attending seminars, and buying tapes to learn as much as possible. For real estate, he recommends taking a jog around a neighborhood you may be interested, and to learn about opportunities where you can invest with little to no money down.

In conclusion, this is one of the best financial books you can read, particularly if you feel trapped in the "rat race" at an underpaid job , and feel you may be interested in becoming an entrepreneur. You can purchase it from Amazon here.