Summary of : Rich Dad and Poor Dad

Rich Dad Poor Dad tells the story of a boy with two fathers, one rich, one poor, to help you develop the mindset and financial knowledge you need to build a life of wealth and freedom.

Rich Dad Poor Dad is a modern classic of personal finance and  favorite finance book of all time. Although controversial and often heavily criticized, people have decided it’s worth reading – otherwise it wouldn’t have sold over 32 million copies.

Robert Kiyosaki tells the story of his two Dad’s in his childhood. His own father and the father of his best friend. While he loved both, they were very different when it came to dealing with finances.

The summary  starts with the idea that many of us are too afraid of being branded as a weirdo, in order to exit the rat race. We let the two main emotions everyone has around money dominate our decisions: fear and greed. That’s why we still stick to the outdated mantra “Go to school, go to college, get a job, play it safe.” when in reality no job is safe any more.

For example, a good fund with a 60% chance to double your money within a year, but a 40% chance of losing it all. However, most likely your fear of losing the money altogether will keep you away from doing so.

But when your greed takes over, you might then spend the extra money on an improved lifestyle, like buying a car, and the payments eat up the money – this way you’re guaranteed to lose 100%. This already gives you a glimpse of how important it is to educate yourself financially. Since we receive no financial education in school or college, sadly, this is entirely up to you.

Look around and you’ll see plenty of financially ignorant people in your own life. Just take a look at local politicians. Is their city in debt? Your mayor might be a great mayor, but unfortunately, no one ever taught him how to deal with money.

For the same reason 38% of Americans don’t save anything for their retirement. The only way for you to counteract this is to start now. Today is the youngest you’ll ever be, so take a close look at what you can and can’t afford. This way you’ll be able to set realistic financial goals, even if it means waiting a few more years for that shiny new BMW.

Next, adopt the mindset of “work to learn” instead of “work to earn”. Set aside 5% of your income each month to buy books, courses and attend seminars on personal finance to start building your financial IQ.

The first step towards building wealth lies in the mindset of managing risks, instead of avoiding them and learning about investments will teach you that it’s better to not play it safe, because that always means missing out on big potential rewards. Don’t start big, just set aside a small amount, like $1,000 or even $100, and invest it in stocks, bonds, or even tax lien certificates. Treat the money as if it’s gone forever and you’ll worry less about losing it.

As soon as you start your journey towards wealth, you’ll realize that it’ll be quite a long one. That’s why it’s important to stay motivated. Kiyosaki suggests creating an “I want” and an “I don’t want” list, with items like: “I want to retire at age 50.” or “I don’t want to end up like my broke uncle.”

Another idea is to pay yourself first each month. Take the portion of your salary you want to spend on stocks or your financial education, invest it and pay your bills afterwards. It’ll create pressure to be creative in making money and show you what you can afford.

Use your money to acquire assets instead of liabilities. Assets are stocks, bonds, real estate that you rent out, royalties (for example from music) and anything that generates money and increases in value over time. Liabilities can be cars or electronics with maintenance costs and monthly payments, a house with a mortgage, and of course debt – basically anything that takes money out of your pocket each month.

There’s no rush. Just stay at your full time job and “mind your own business”. In this case, your job is what pays the bills and your business is what makes you wealthy.

The most important thing is that you start today. You are your own biggest asset, so the first thing you should put some money into is yourself.

Warren Buffet too says "The best investment is investing in yourself."

Unfortunately, the story of his two Dads is what makes the book great. While the financial advice is sound in the summary.

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Favorite Quotes :

1. The lack of money is the root of all evil.
    The love for money is the root of all evil.

2. I cannot afford it.
    How can I afford it.

3. Study hard to work in a good company.
   Study hard to buy/build a good company.