Rich Dad, Poor Dad is one of the most popular books in personal finance. published almost two decades ago by Sharon Lechter and Robert Kiyosaki, the book has sold more than 30 million copies in 40 languages.
Though the book has two authors, the stories in the book involve Robert Kiyosaki. The title of the book is based on two dads – “Rich Dad” is Kiyosaki’s friend’s dad who accumulated his wealth through entrepreneurship and “Poor Dad” is Kiyosaki’s own biological father who did not attain financial independence despite working hard.
The rich Dad had many streams of income and learned skills to become a successful entrepreneur. The poor dad, on the other hand, struggled to pay his bills despite having a stable job.
Highlights From Rich Dad, Poor Dad
Buy assets and avoid liabilities
Assets generate money for you. Liabilities take money out of your pocket making you poorer. Assets include bonds, rental income properties, and dividend stocks whereas liabilities anything bought on credit – your expensive car, house, etc.
This is common sense advice provided by every finance guru. But the book does a good job of driving home the point that it is important to build up assets while minimizing liabilities.
Kiyosaki stresses the value of building multiple income streams and not focusing on just your job.
Pay yourself first
After you pay the bills, invest the rest with an eye on the future. Invest in assets that generate income. Over time, this will reduce the reliance on your job for income. Reduce your expenses as much as you can, and invest the rest.
Financial literacy is important
Financial literacy must be mastered just like any other skill. You will be shocked by how little people know about money. Kiyosaki recommends learning about the value of savings and knowing the difference between assets and liabilities.
Most families insist on working hard without realizing that hard work alone will not make them wealthy. These families build liabilities instead of assets and wonder why they are not getting ahead in life
By having a strong foundation in finance, you can avoid these mistakes and take steps that will make you wealthy.
Selling is critical
Rich Dad, Poor Dad is a finance book. Yet, Kiyosaki notes that sales and marketing skills are important for everyone. Even if you are not in sales, the ability to communicate with your customer, boss, spouse, and children are very critical to build wealth.
Mind your own business
Kiyosaki wants everyone to focus not on their employer’s business but on themselves. He suggests real estate and stocks as two areas where you can invest and build wealth over time.
On real estate, his preference is to buy small properties and gradually trade up to bigger properties. He also avoids taxes when he upgrades to bigger properties by using IRS allowed mechanisms.
Overcome self-doubt and fear
Kiyosaki states that we as humans are held back by fear, cynicism, laziness, bad habits, and arrogance. He says that while these things are natural, we have to overcome these obstacles.
There are a lot of people who have ideas but are unable to take action or point out the obstacles if an idea is brought up. There is a huge reward for those who face the fear and take action to create wealth.
Criticisms of book and Kiyosaki
While the book has some good ideas and stories that everyone can take advantage of, it has drawn criticisms and controversy. Some of the stories in the book are exaggerated and Kiyosaki has tried to upsell his book readers with additional seminars. His business has also been blamed for not paying vendors when it went bankrupt despite Kiyosaki’s considerable wealth.
Rich Dad, Poor Dad is a classic personal finance book that has nuggets of wisdom. The book has good stories that illustrate the importance of building assets, reducing liabilities, overcoming fear and investing in yourself. This book is highly recommended for everyone, particularly teenagers. This book will help teenagers understand the central principles of personal finance and how to create wealth.