Rich Dad, Poor Dad by Kiyosaki

Ref: Robert Kiyosaki (1997). Rich Dad, Poor Dad.

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Summary­

  • A simplistic overview of attitudes, mindsets, and differences of the rich, middle, and poor classes with a focus on personal finance.

  • Rat Race: The pattern of get up, go to work, pay bills; get up, go to work, pay bills. People’s lives are forever controlled by two emotions: fear and greed. Offer them more money and they continue the cycle by increasing their spending.

  • Most people work for everyone but themselves. They work first for the owners of the company, then for the government through taxes, and finally for the bank that owns their mortgage. They only know one solution: Work hard, save, and borrow; they work very hard for little money, clinging to the illusion of job security and looking forward to a three-week vacation each year and maybe a skimpy pension after forty-five years of service.

  • Lesson 1: The Rich don’t work for money. The Poor and the middle-class work for money. The rich have money work for them.

  • Lesson 2: It’s how much money you make. It’s how much money you keep.

    • Rule 1: You must know the difference between an asset and a liability, and buy assets.

      • Asset: Something that puts money in my pocket.

      • Liability: is something that takes money out of my pocket.

  • Lesson 3: Mind Your Own Business. The Rich focus on their asset columns while everyone else focuses on their income statements.

  • Lesson 4: Know the History of Taxes and the power of corporations- the biggest secret of the rich.

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Personal Finance

  • I use two main vehicles to achieve financial growth: real estate and small-cap stocks. I use real estate as my foundation. Day in and day out, my properties provide cash flow and occasional spurts of growth in value. The small-cap stocks are used for fast growth.

  • Financial Aptitude: What you do with the money once you make it, how to keep people from taking it from you, how to keep it longer, and how to make that money work hard for you.

  • Keep expenses low, reduce liabilities, and diligently build a base of solid assets.

    • Assets: Real assets fall into the following categories: Businesses that do not require my presence: I own them, but they are managed or run by other people. If I have to work there, it’s not a business. It becomes my job, stocks & bonds, Income-generating real estate, Notes (IOUs), Royalties from intellectual property such as music, scripts, and patents, anything else that has value, produces income or appreciates, and has a ready market

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Mindset (Rich v. Poor Dad)

  • One dad would say, “The love of money is the root of all evil.” The other said, “The lack of money is the root of all evil.

  • One dad believed in total financial self-reliance. He spoke out against the entitlement mentality and how it created weak and financially needy people. He was emphatic about being financially competent.

  • My poor dad would say, “I’m not interested in money,” or “Money doesn’t matter.” My rich dad always said, “Money is power.”

  • My friends with money talk about money. They don’t do it to brag. They’re interested in the subject. So I learn from them, and they learn from me. My friends who are in dire financial straits do not like talking about money, business, or investing. They often think it rude or unintellectual.

  • Rich people buy luxuries last, while the poor and middle class tend to buy luxuries first.

  • One dad thought that the rich should pay more in taxes to take care of those less fortunate. The other said, “Taxes punish those who produce and reward those who don’t produce.”

  • If you think I’m the problem, then you have to change me. If you realize that you’re the problem, then you can change yourself, learn something, and grow wiser. Most people want everyone else in the world to change but themselves. Let me tell you, it’s easier to change yourself than everyone else.

  • Life pushes all of us around. Some people give up and others fight. A few learn the lesson and move on. They welcome life pushing them around. To these few people, it means they need and want to learn something. They learn and move on. Most quit, and a few fight. Some just let life push them around. Others get angry and push back. But they push back against their boss, or their job, or their husband or wife. They do not know it’s life that’s pushing.

  • The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government or the rich. It’s self-inflicted fear and ignorance that keep people trapped.

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Education

  • Financial intelligence: a synergy of accounting, investing, marketing, and law.

  • Sadly, money is not taught in schools. Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors, and accountants who earned excellent grades may struggle financially all of their lives. Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training in the subject of money.

  • Schools were designed to produce good employees, instead of employers.

  • The world is filled with talented poor people. All too often, they’re poor or struggle financially or earn less than they are capable of, not because of what they know, but because of what they do not know. They focus on perfecting their skills at building a better hamburger rather than the skills of selling and delivering the hamburger.

  • A doctor, wanting more money to better provide for his family, raises his fees. By raising his fees, it makes healthcare more expensive for everyone. It hurts the poor people the most, so they have worse health than those with money. Because the doctors raise their fees, the attorneys raise their fees. Because the attorneys’ fees have gone up, schoolteachers want a raise, which raises our taxes, and on and on and on. Soon there will be such a horrifying gap between the rich and the poor that chaos will break out and another great civilization will collapse. History proves that great civilizations collapse when the gap between the haves and have-nots is too great. Sadly, America is on that same course because we haven’t learned from history. We only memorize historical dates and names, not the lesson.

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Law & Contracts

  • Every time people try to punish the rich, the rich don’t simply comply. They react. They have the money, power, and intent to change things. They don’t just sit there and voluntarily pay more taxes. Instead, they search for ways to minimize their tax burden. They hire smart attorneys and accountants, and persuade politicians to change laws or create legal loopholes. They use their resources to effect change.

  • I make an offer with language that details “subject-to” contingencies, such as the approval of a business partner. Never specify who the business partner is. Most people don’t know that my partner is my cat.

  • It is the knowledge of the legal corporate structure that really gives the rich a vast advantage over the poor and the middle class.

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Corporations

  • A corporation is merely a file folder with some legal documents in it, sitting in some attorney’s office and registered with a state government agency.

  • The income-tax rate of a corporation is less than the individual income-tax rates.

  • A corporation can do many things that an employee cannot, like pay expenses before paying taxes.

  • Employees earn and get taxed, and they try to live on what is left. A corporation earns, spends everything it can, and is taxed on anything that is left.

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Misc Quotes

  • Remember the golden rule. He who has the gold makes the rules.

  • When it comes to money, high emotions tend to lower financial intelligence.

  • There is a difference between being poor and being broke. Broke is temporary. Poor is eternal

  • The key to becoming wealthy is the ability to convert earned income into passive income or portfolio income as quickly as possible.

  • I would venture to say that personal self-discipline is the number-one delineating factor between the rich, the poor, and the middle class.

  • Risk comes from not knowing what you're doing.-Warren Buffet.

  • Sometimes you win and sometimes you learn.

  • Learn to use your emotions to think, not think with your emotions.

  • Unfortunately, for many people school is the end, not the beginning.

  • Do what you feel in your heart to be right—for you’ll be criticized anyway. You’ll be damned if you do, and damned if you don’t.-Eleanor Roosevelt.  

  • Many people use arrogance to try to hide their own ignorance. Intelligence combined with arrogance equals ignorance.

  • Ray Krok knew that the land and its location were the most significant factors in the success of each franchise.

  • If you learn something new, you are then required to make mistakes in order to fully understand what you have learned.

  • 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.

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