“Rich Dad, Poor Dad” by Robert T. Kiyosaki and Sharon L. Lechter is a seminal work that explores the financial education and habits of the wealthy. The book presents six key principles that differentiate the rich from the poor and middle class.
- The Rich Don’t Work for Money
The first principle emphasizes that the rich don’t work for money; instead, they make money work for them. They leverage their knowledge and business acumen to create income-generating opportunities. The book shares a story of two boys who, while working in a supermarket, discover that discarded comic books can be turned into a profitable venture. They set up a library, allowing other children to read the comics for a fee, earning them more money than their supermarket job.
- School Education Doesn’t Replace Financial Education
The second principle underscores the importance of financial education. Kiyosaki argues that a house, often considered an asset, is actually a liability as it doesn’t generate income but incurs costs. He criticizes the traditional education system for promoting the idea of working for money rather than learning how to make money work for you. The rich, on the other hand, build a structure that generates income, using the profits to acquire more assets.
- Mind Your Own Business
The third principle encourages individuals to start their own businesses. Even if one starts as an employee, it’s crucial to invest as much as possible into one’s future. The book cites the example of the McDonald’s founder, who, despite selling burgers, owns the largest real estate in the world.
- Save Taxes Through Company Formation
The fourth principle discusses the tax benefits of owning a business. As an employee, your income is taxed before you receive it. However, as a business owner, you can pay for many expenses pre-tax, reducing your taxable income.
- The Rich Invest Money
The fifth principle emphasizes the importance of investing. Rather than paying experts to manage your wealth, Kiyosaki encourages individuals to educate themselves about investment opportunities. He shares a story of a farmer who wanted to buy land but lacked the knowledge and time to find a good deal. Kiyosaki found a larger piece of land, sold a portion to the farmer, and kept the rest, demonstrating the power of thinking big when it comes to investments.
- Work to Learn, Not for Money
The final principle encourages continuous learning and the development of leadership and system management skills. Kiyosaki stresses the importance of learning to sell, as it’s a crucial skill in a capitalist system.
In conclusion, “Rich Dad, Poor Dad” encourages individuals to break away from traditional thinking about money and employment. It promotes the development of new ideas for wealth creation, the implementation of these ideas, and the importance of having a mentor. The book also advises investing in real estate during economic downturns and selling when the market recovers. By following these principles, Kiyosaki argues, one can achieve financial independence and wealth.